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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 Cognizant Technology Solutions Corp was -0.54. The lowest was -2.83. And the median was -2.21.
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 Cognizant Technology Solutions Corp 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 * 0.9777||+||0.528 * 1.0012||+||0.404 * 3.2594||+||0.892 * 1.2076||+||0.115 * 0.7749|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0379||+||4.679 * -0.0152||-||0.327 * 1.308|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $2,136 Mil.|
Revenue was 3187 + 3085.1 + 2911.4 + 2742.23 = $11,926 Mil.
Gross Profit was 1252.4 + 1240.3 + 1184.2 + 1102.846 = $4,780 Mil.
Total Current Assets was $7,238 Mil.
Total Assets was $12,268 Mil.
Property, Plant and Equipment(Net PPE) was $1,279 Mil.
Depreciation, Depletion and Amortization(DDA) was $305 Mil.
Selling, General & Admin. Expense(SGA) was $2,413 Mil.
Total Current Liabilities was $2,128 Mil.
Long-Term Debt was $900 Mil.
Net Income was 397.2 + 420.1 + 382.9 + 362.857 = $1,563 Mil.
Non Operating Income was -16.2 + -10.2 + -2.7 + -9.28 = $-38 Mil.
Cash Flow from Operations was 817.9 + 456.1 + 189.3 + 324.196 = $1,787 Mil.
|Accounts Receivable was $1,809 Mil.
Revenue was 2581.009 + 2517.094 + 2422.348 + 2355.488 = $9,876 Mil.
Gross Profit was 1011.181 + 1017.632 + 989.904 + 944.333 = $3,963 Mil.
Total Current Assets was $7,260 Mil.
Total Assets was $9,227 Mil.
Property, Plant and Equipment(Net PPE) was $1,101 Mil.
Depreciation, Depletion and Amortization(DDA) was $193 Mil.
Selling, General & Admin. Expense(SGA) was $1,925 Mil.
Total Current Liabilities was $1,741 Mil.
Long-Term Debt was $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)|
|=||(2135.7 / 11925.73)||/||(1809.038 / 9875.939)|
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)|
|=||(1240.3 / 9875.939)||/||(1252.4 / 11925.73)|
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 - (7237.9 + 1278.9) / 12267.6)||/||(1 - (7260.026 + 1101.468) / 9227.043)|
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))|
|=||(193.108 / (193.108 + 1101.468))||/||(304.876 / (304.876 + 1278.9))|
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)|
|=||(2412.522 / 11925.73)||/||(1924.902 / 9875.939)|
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)|
|=||((900 + 2128.4) / 12267.6)||/||((0 + 1741.464) / 9227.043)|
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|
|=||(1563.057 - -38.38||-||1787.496)||/||12267.6|
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.
Cognizant Technology Solutions Corp has a M-score of -1.61 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
Cognizant Technology Solutions Corp Annual Data
Cognizant Technology Solutions Corp Quarterly Data