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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.
During the past 13 years, the highest Beneish M-Score of Cisco Systems Inc was -1.90. The lowest was -4.27. And the median was -2.71.
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 * 1.0671||+||0.528 * 0.9735||+||0.404 * 0.9407||+||0.892 * 1.0312||+||0.115 * 0.9938|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9996||+||4.679 * -0.0321||-||0.327 * 0.982|
|This Year (Apr15) TTM:||Last Year (Apr14) TTM:|
|Accounts Receivable was $4,889 Mil.|
Revenue was 12137 + 11936 + 12245 + 12357 = $48,675 Mil.
Gross Profit was 7525 + 7090 + 7333 + 7405 = $29,353 Mil.
Total Current Assets was $69,331 Mil.
Total Assets was $106,212 Mil.
Property, Plant and Equipment(Net PPE) was $3,276 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,412 Mil.
Selling, General & Admin. Expense(SGA) was $11,757 Mil.
Total Current Liabilities was $23,245 Mil.
Long-Term Debt was $16,586 Mil.
Net Income was 2437 + 2397 + 1828 + 2247 = $8,909 Mil.
Non Operating Income was 59 + 201 + -22 + 56 = $294 Mil.
Cash Flow from Operations was 3040 + 2883 + 2491 + 3612 = $12,026 Mil.
|Accounts Receivable was $4,443 Mil.
Revenue was 11545 + 11155 + 12085 + 12417 = $47,202 Mil.
Gross Profit was 7006 + 5951 + 7407 + 7347 = $27,711 Mil.
Total Current Assets was $64,288 Mil.
Total Assets was $101,856 Mil.
Property, Plant and Equipment(Net PPE) was $3,310 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,411 Mil.
Selling, General & Admin. Expense(SGA) was $11,406 Mil.
Total Current Liabilities was $18,515 Mil.
Long-Term Debt was $20,384 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)|
|=||(4889 / 48675)||/||(4443 / 47202)|
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)|
|=||(7090 / 47202)||/||(7525 / 48675)|
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 - (69331 + 3276) / 106212)||/||(1 - (64288 + 3310) / 101856)|
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))|
|=||(2411 / (2411 + 3310))||/||(2412 / (2412 + 3276))|
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)|
|=||(11757 / 48675)||/||(11406 / 47202)|
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)|
|=||((16586 + 23245) / 106212)||/||((20384 + 18515) / 101856)|
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|
|=||(8909 - 294||-||12026)||/||106212|
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 -2.57 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