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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.
Demand Media Inc has a M-score of -3.43 suggests that the company is not a manipulator.
During the past 6 years, the highest Beneish M-Score of Demand Media Inc was -2.78. The lowest was -3.42. And the median was -3.08.
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 * 0.7795||+||0.528 * 1.2652||+||0.404 * 0.8841||+||0.892 * 0.9242||+||0.115 * 0.901|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.035||+||4.679 * -0.1389||-||0.327 * 1.33|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $27.6 Mil.|
Revenue was 89.766 + 89.752 + 96.661 + 96.251 = $372.4 Mil.
Gross Profit was 33.451 + 35.66 + 41.534 + 43.367 = $154.0 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 $111.6 Mil.
Total Current Liabilities was $166.1 Mil.
Long-Term Debt was $73.8 Mil.
Net Income was -14.333 + -10.956 + -11.521 + -10.44 = $-47.3 Mil.
Non Operating Income was 0.822 + 6.164 + 1.654 + 1.411 = $10.1 Mil.
Cash Flow from Operations was 12.454 + 5.688 + 9.735 + 18.814 = $46.7 Mil.
|Accounts Receivable was $38.3 Mil.
Revenue was 101.066 + 100.62 + 103.142 + 98.147 = $403.0 Mil.
Gross Profit was 52.491 + 52.443 + 54.277 + 51.623 = $210.8 Mil.
Total Current Assets was $180.0 Mil.
Total Assets was $705.8 Mil.
Property, Plant and Equipment(Net PPE) was $43.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $59.2 Mil.
Selling, General & Admin. Expense(SGA) was $116.6 Mil.
Total Current Liabilities was $150.0 Mil.
Long-Term Debt was $20.0 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)|
|=||(27.608 / 372.43)||/||(38.32 / 402.975)|
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)|
|=||(35.66 / 402.975)||/||(33.451 / 372.43)|
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 - (258.964 + 37.132) / 748.717)||/||(1 - (180.01 + 43.174) / 705.829)|
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))|
|=||(59.166 / (59.166 + 43.174))||/||(66.493 / (66.493 + 37.132))|
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)|
|=||(111.575 / 372.43)||/||(116.647 / 402.975)|
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)|
|=||((73.75 + 166.051) / 748.717)||/||((20 + 149.973) / 705.829)|
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|
|=||(-47.25 - 10.051||-||46.691)||/||748.717|
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 -3.43 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