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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 7 years, the highest Beneish M-Score of Demand Media Inc was -2.89. The lowest was -13.49. And the median was -3.38.
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 Demand Media 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 * 0.4942||+||0.528 * 1.2467||+||0.404 * 0.5966||+||0.892 * 0.7747||+||0.115 * 0.9105|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0814||+||4.679 * -2.2257||-||0.327 * 0.6117|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $10.6 Mil.|
Revenue was 29.768 + 33.21 + 42.981 + 41.315 = $147.3 Mil.
Gross Profit was 13.466 + 16.373 + 22.303 + 24.553 = $76.7 Mil.
Total Current Assets was $60.7 Mil.
Total Assets was $124.3 Mil.
Property, Plant and Equipment(Net PPE) was $18.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $44.8 Mil.
Selling, General & Admin. Expense(SGA) was $64.8 Mil.
Total Current Liabilities was $24.4 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -14.408 + -6.749 + -18.23 + -223.838 = $-263.2 Mil.
Non Operating Income was 0.019 + 2.827 + -0.082 + 0.782 = $3.5 Mil.
Cash Flow from Operations was -4.194 + -2.415 + 15.239 + 1.28 = $9.9 Mil.
|Accounts Receivable was $27.6 Mil.
Revenue was 43.077 + 45.056 + 51.232 + 50.745 = $190.1 Mil.
Gross Profit was 26.757 + 29.433 + 32.517 + 34.722 = $123.4 Mil.
Total Current Assets was $259.0 Mil.
Total Assets was $748.7 Mil.
Property, Plant and Equipment(Net PPE) was $37.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $66.5 Mil.
Selling, General & Admin. Expense(SGA) was $77.3 Mil.
Total Current Liabilities was $166.1 Mil.
Long-Term Debt was $73.8 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)|
|=||(10.57 / 147.274)||/||(27.608 / 190.11)|
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)|
|=||(16.373 / 190.11)||/||(13.466 / 147.274)|
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 - (60.725 + 18.752) / 124.314)||/||(1 - (258.964 + 37.132) / 748.717)|
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))|
|=||(66.493 / (66.493 + 37.132))||/||(44.76 / (44.76 + 18.752))|
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)|
|=||(64.788 / 147.274)||/||(77.34 / 190.11)|
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 + 24.356) / 124.314)||/||((73.75 + 166.051) / 748.717)|
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|
|=||(-263.225 - 3.546||-||9.91)||/||124.314|
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.
Demand Media Inc has a M-score of -13.49 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
Demand Media Inc Annual Data
Demand Media Inc Quarterly Data