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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 -3.35. 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 * 1.981||+||0.528 * 0.9935||+||0.404 * 0.8368||+||0.892 * 1.1511||+||0.115 * 1.0473|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9707||+||4.679 * -0.1392||-||0.327 * 1.0127|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $0.4 Mil.|
Revenue was 91.531 + 90.417 + 88.054 + 83.494 = $353.5 Mil.
Gross Profit was 67.069 + 65.986 + 64.041 + 60.271 = $257.4 Mil.
Total Current Assets was $193.9 Mil.
Total Assets was $349.3 Mil.
Property, Plant and Equipment(Net PPE) was $48.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $24.6 Mil.
Selling, General & Admin. Expense(SGA) was $176.3 Mil.
Total Current Liabilities was $64.6 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 3.826 + 3.55 + 6.248 + 5.198 = $18.8 Mil.
Non Operating Income was 0 + 0 + 0.172 + 0 = $0.2 Mil.
Cash Flow from Operations was 12.592 + 20.221 + 16.107 + 18.347 = $67.3 Mil.
|Accounts Receivable was $0.2 Mil.
Revenue was 81.256 + 78.874 + 74.931 + 72.039 = $307.1 Mil.
Gross Profit was 59.156 + 57.147 + 54.279 + 51.561 = $222.1 Mil.
Total Current Assets was $151.1 Mil.
Total Assets was $305.6 Mil.
Property, Plant and Equipment(Net PPE) was $42.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $23.2 Mil.
Selling, General & Admin. Expense(SGA) was $157.8 Mil.
Total Current Liabilities was $55.8 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)|
|=||(0.358 / 353.496)||/||(0.157 / 307.1)|
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)|
|=||(65.986 / 307.1)||/||(67.069 / 353.496)|
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 - (193.926 + 48.44) / 349.254)||/||(1 - (151.127 + 42.707) / 305.607)|
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))|
|=||(23.247 / (23.247 + 42.707))||/||(24.572 / (24.572 + 48.44))|
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)|
|=||(176.262 / 353.496)||/||(157.753 / 307.1)|
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 + 64.629) / 349.254)||/||((0 + 55.843) / 305.607)|
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|
|=||(18.822 - 0.172||-||67.267)||/||349.254|
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 -2.16 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