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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 -3.40. 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 * 1.0397||+||0.528 * 1.0097||+||0.404 * 3.005||+||0.892 * 1.163||+||0.115 * 0.9125|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0331||+||4.679 * -0.0008||-||0.327 * 1.3595|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $2,060 Mil.|
Revenue was 2911.4 + 2742.23 + 2581.009 + 2517.094 = $10,752 Mil.
Gross Profit was 1184.2 + 1102.846 + 1011.181 + 1017.632 = $4,316 Mil.
Total Current Assets was $6,407 Mil.
Total Assets was $11,383 Mil.
Property, Plant and Equipment(Net PPE) was $1,268 Mil.
Depreciation, Depletion and Amortization(DDA) was $237 Mil.
Selling, General & Admin. Expense(SGA) was $2,162 Mil.
Total Current Liabilities was $1,884 Mil.
Long-Term Debt was $925 Mil.
Net Income was 382.9 + 362.857 + 355.624 + 371.908 = $1,473 Mil.
Non Operating Income was -2.7 + -9.28 + -10.975 + -0.215 = $-23 Mil.
Cash Flow from Operations was 189.3 + 324.196 + 583.181 + 408.333 = $1,505 Mil.
|Accounts Receivable was $1,704 Mil.
Revenue was 2422.3 + 2355.488 + 2305.723 + 2161.24 = $9,245 Mil.
Gross Profit was 989.9 + 944.333 + 923.387 + 889.227 = $3,747 Mil.
Total Current Assets was $6,291 Mil.
Total Assets was $8,279 Mil.
Property, Plant and Equipment(Net PPE) was $1,091 Mil.
Depreciation, Depletion and Amortization(DDA) was $183 Mil.
Selling, General & Admin. Expense(SGA) was $1,800 Mil.
Total Current Liabilities was $1,503 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)|
|=||(2059.9 / 10751.733)||/||(1703.605 / 9244.751)|
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)|
|=||(1102.846 / 9244.751)||/||(1184.2 / 10751.733)|
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 - (6406.5 + 1268) / 11383.4)||/||(1 - (6290.74 + 1090.885) / 8279.299)|
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))|
|=||(183.029 / (183.029 + 1090.885))||/||(236.967 / (236.967 + 1268))|
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)|
|=||(2162.426 / 10751.733)||/||(1799.805 / 9244.751)|
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)|
|=||((925 + 1884.1) / 11383.4)||/||((0 + 1502.866) / 8279.299)|
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|
|=||(1473.289 - -23.17||-||1505.01)||/||11383.4|
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 -1.62 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