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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 -2.64 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Cisco Systems Inc was -1.57. The lowest was -4.14. And the median was -2.64.
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 * 0.9915||+||0.528 * 1.0354||+||0.404 * 1.0476||+||0.892 * 1.0131||+||0.115 * 1.0436|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9451||+||4.679 * -0.0463||-||0.327 * 1.0114|
|This Year (Jan14) TTM:||Last Year (Jan13) TTM:|
|Accounts Receivable was $8,394 Mil.|
Revenue was 11155 + 12085 + 12417 + 12216 = $47,873 Mil.
Gross Profit was 5951 + 7407 + 7347 + 7511 = $28,216 Mil.
Total Current Assets was $60,689 Mil.
Total Assets was $98,427 Mil.
Property, Plant and Equipment(Net PPE) was $3,234 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,331 Mil.
Selling, General & Admin. Expense(SGA) was $11,509 Mil.
Total Current Liabilities was $22,944 Mil.
Long-Term Debt was $12,385 Mil.
Net Income was 1429 + 1996 + 2270 + 2478 = $8,173 Mil.
Non Operating Income was 55 + 56 + 29 + -14 = $126 Mil.
Cash Flow from Operations was 2873 + 2649 + 3986 + 3094 = $12,602 Mil.
|Accounts Receivable was $8,356 Mil.
Revenue was 12098 + 11876 + 11690 + 11588 = $47,252 Mil.
Gross Profit was 7343 + 7239 + 7085 + 7169 = $28,836 Mil.
Total Current Assets was $60,725 Mil.
Total Assets was $96,378 Mil.
Property, Plant and Equipment(Net PPE) was $3,403 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,643 Mil.
Selling, General & Admin. Expense(SGA) was $12,020 Mil.
Total Current Liabilities was $17,950 Mil.
Long-Term Debt was $16,254 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)|
|=||(8394 / 47873)||/||(8356 / 47252)|
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)|
|=||(7407 / 47252)||/||(5951 / 47873)|
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 - (60689 + 3234) / 98427)||/||(1 - (60725 + 3403) / 96378)|
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))|
|=||(2643 / (2643 + 3403))||/||(2331 / (2331 + 3234))|
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)|
|=||(11509 / 47873)||/||(12020 / 47252)|
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)|
|=||((12385 + 22944) / 98427)||/||((16254 + 17950) / 96378)|
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|
|=||(8173 - 126||-||12602)||/||98427|
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 -2.64 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