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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
Cisco Systems Inc has a M-score of -2.75 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Cisco Systems Inc was -2.17. The lowest was -3.89. And the median was -2.69.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Cisco Systems Inc for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 0.9721||+||0.528 * 1.0282||+||0.404 * 1.0345||+||0.892 * 0.9699||+||0.115 * 0.9686|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9992||+||4.679 * -0.0449||-||0.327 * 1.102|
|This Year (Jul14) TTM:||Last Year (Jul13) TTM:|
|Accounts Receivable was $5,157 Mil.|
Revenue was 12357 + 11545 + 11155 + 12085 = $47,142 Mil.
Gross Profit was 7405 + 7006 + 5951 + 7407 = $27,769 Mil.
Total Current Assets was $67,114 Mil.
Total Assets was $105,134 Mil.
Property, Plant and Equipment(Net PPE) was $3,252 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,432 Mil.
Selling, General & Admin. Expense(SGA) was $11,437 Mil.
Total Current Liabilities was $19,809 Mil.
Long-Term Debt was $20,401 Mil.
Net Income was 2247 + 2181 + 1429 + 1996 = $7,853 Mil.
Non Operating Income was 56 + 76 + 55 + 56 = $243 Mil.
Cash Flow from Operations was 3612 + 3198 + 2873 + 2649 = $12,332 Mil.
|Accounts Receivable was $5,470 Mil.
Revenue was 12417 + 12216 + 12098 + 11876 = $48,607 Mil.
Gross Profit was 7347 + 7511 + 7343 + 7239 = $29,440 Mil.
Total Current Assets was $65,521 Mil.
Total Assets was $101,191 Mil.
Property, Plant and Equipment(Net PPE) was $3,322 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,351 Mil.
Selling, General & Admin. Expense(SGA) was $11,802 Mil.
Total Current Liabilities was $22,192 Mil.
Long-Term Debt was $12,928 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(5157 / 47142)||/||(5470 / 48607)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(7006 / 48607)||/||(7405 / 47142)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (67114 + 3252) / 105134)||/||(1 - (65521 + 3322) / 101191)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(2351 / (2351 + 3322))||/||(2432 / (2432 + 3252))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(11437 / 47142)||/||(11802 / 48607)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((20401 + 19809) / 105134)||/||((12928 + 22192) / 101191)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(7853 - 243||-||12332)||/||105134|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Cisco Systems Inc has a M-score of -2.75 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Cisco Systems Inc Annual Data
Cisco Systems Inc Quarterly Data