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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 -2.26.
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 * 1.0496||+||0.528 * 1.0038||+||0.404 * 0.9999||+||0.892 * 1.1117||+||0.115 * 0.8878|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9916||+||4.679 * -0.0097||-||0.327 * 0.9221|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $2,492 Mil.|
Revenue was 3453.2 + 3369.9 + 3202 + 3232.5 = $13,258 Mil.
Gross Profit was 1375.8 + 1332.2 + 1286.6 + 1298.9 = $5,294 Mil.
Total Current Assets was $8,200 Mil.
Total Assets was $13,717 Mil.
Property, Plant and Equipment(Net PPE) was $1,323 Mil.
Depreciation, Depletion and Amortization(DDA) was $366 Mil.
Selling, General & Admin. Expense(SGA) was $2,659 Mil.
Total Current Liabilities was $2,301 Mil.
Long-Term Debt was $822 Mil.
Net Income was 444.4 + 252.4 + 441.2 + 423.4 = $1,561 Mil.
Non Operating Income was 7.2 + -19.3 + 9.6 + -15.3 = $-18 Mil.
Cash Flow from Operations was 594 + 359.6 + 68.8 + 690 = $1,712 Mil.
|Accounts Receivable was $2,136 Mil.
Revenue was 3187 + 3085.1 + 2911.4 + 2742.2 = $11,926 Mil.
Gross Profit was 1252.4 + 1240.3 + 1184.2 + 1102.8 = $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.
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)|
|=||(2492.1 / 13257.6)||/||(2135.7 / 11925.7)|
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)|
|=||(4779.7 / 11925.7)||/||(5293.5 / 13257.6)|
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 - (8199.8 + 1323.3) / 13716.7)||/||(1 - (7237.9 + 1278.9) / 12267.6)|
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))|
|=||(304.9 / (304.9 + 1278.9))||/||(366.4 / (366.4 + 1323.3))|
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)|
|=||(2659.3 / 13257.6)||/||(2412.5 / 11925.7)|
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)|
|=||((821.6 + 2300.7) / 13716.7)||/||((900 + 2128.4) / 12267.6)|
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|
|=||(1561.4 - -17.8||-||1712.4)||/||13716.7|
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 -2.36 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
Cognizant Technology Solutions Corp Annual Data
Cognizant Technology Solutions Corp Quarterly Data