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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 Constant Contact Inc was 3.49. The lowest was -3.34. And the median was -2.29.
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 Constant Contact 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 * 2.6027||+||0.528 * 0.992||+||0.404 * 0.8847||+||0.892 * 1.1359||+||0.115 * 1.026|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.977||+||4.679 * -0.1245||-||0.327 * 0.9616|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $0.4 Mil.|
Revenue was 91.859 + 91.531 + 90.417 + 88.054 = $361.9 Mil.
Gross Profit was 67.259 + 67.069 + 65.986 + 64.041 = $264.4 Mil.
Total Current Assets was $193.6 Mil.
Total Assets was $348.4 Mil.
Property, Plant and Equipment(Net PPE) was $47.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $24.6 Mil.
Selling, General & Admin. Expense(SGA) was $180.5 Mil.
Total Current Liabilities was $61.3 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 6.396 + 3.826 + 3.55 + 6.248 = $20.0 Mil.
Non Operating Income was 0 + 0 + 0 + 0.172 = $0.2 Mil.
Cash Flow from Operations was 14.298 + 12.592 + 20.221 + 16.107 = $63.2 Mil.
|Accounts Receivable was $0.1 Mil.
Revenue was 83.494 + 81.256 + 78.874 + 74.931 = $318.6 Mil.
Gross Profit was 60.271 + 59.156 + 57.147 + 54.279 = $230.9 Mil.
Total Current Assets was $164.8 Mil.
Total Assets was $320.7 Mil.
Property, Plant and Equipment(Net PPE) was $44.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $23.8 Mil.
Selling, General & Admin. Expense(SGA) was $162.6 Mil.
Total Current Liabilities was $58.7 Mil.
Long-Term Debt was $0.0 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)|
|=||(0.408 / 361.861)||/||(0.138 / 318.555)|
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)|
|=||(67.069 / 318.555)||/||(67.259 / 361.861)|
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 - (193.559 + 47.337) / 348.431)||/||(1 - (164.809 + 44.022) / 320.706)|
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))|
|=||(23.794 / (23.794 + 44.022))||/||(24.601 / (24.601 + 47.337))|
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)|
|=||(180.46 / 361.861)||/||(162.603 / 318.555)|
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)|
|=||((0 + 61.339) / 348.431)||/||((0 + 58.715) / 320.706)|
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|
|=||(20.02 - 0.172||-||63.218)||/||348.431|
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.
Constant Contact Inc has a M-score of -1.50 signals that the company is likely to 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
Constant Contact Inc Annual Data
Constant Contact Inc Quarterly Data