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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 -8.96 suggests that the company is not a manipulator.
During the past 6 years, the highest Beneish M-Score of Demand Media Inc was -2.89. The lowest was -8.96. And the median was -3.13.
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 * 0.3774||+||0.528 * 1.4866||+||0.404 * 0.4589||+||0.892 * 1.286||+||0.115 * 0.8019|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8339||+||4.679 * -1.2862||-||0.327 * 1.5714|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $17.7 Mil.|
Revenue was 41.315 + 89.766 + 89.752 + 236.419 = $457.3 Mil.
Gross Profit was 24.553 + 33.451 + 35.66 + 74.097 = $167.8 Mil.
Total Current Assets was $140.6 Mil.
Total Assets was $234.6 Mil.
Property, Plant and Equipment(Net PPE) was $24.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $62.2 Mil.
Selling, General & Admin. Expense(SGA) was $119.7 Mil.
Total Current Liabilities was $34.3 Mil.
Long-Term Debt was $70.0 Mil.
Net Income was -223.838 + -14.333 + -10.956 + -11.521 = $-260.6 Mil.
Non Operating Income was 0.782 + 0.822 + 6.164 + 4.165 = $11.9 Mil.
Cash Flow from Operations was 1.28 + 12.454 + 5.688 + 9.735 = $29.2 Mil.
|Accounts Receivable was $36.4 Mil.
Revenue was 50.745 + 101.066 + 100.62 + 103.142 = $355.6 Mil.
Gross Profit was 34.722 + 52.491 + 52.443 + 54.277 = $193.9 Mil.
Total Current Assets was $215.8 Mil.
Total Assets was $738.1 Mil.
Property, Plant and Equipment(Net PPE) was $44.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $60.6 Mil.
Selling, General & Admin. Expense(SGA) was $111.6 Mil.
Total Current Liabilities was $166.2 Mil.
Long-Term Debt was $42.5 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)|
|=||(17.663 / 457.252)||/||(36.399 / 355.573)|
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)|
|=||(33.451 / 355.573)||/||(24.553 / 457.252)|
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 - (140.567 + 24.335) / 234.605)||/||(1 - (215.755 + 44.493) / 738.076)|
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))|
|=||(60.554 / (60.554 + 44.493))||/||(62.207 / (62.207 + 24.335))|
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)|
|=||(119.688 / 457.252)||/||(111.614 / 355.573)|
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)|
|=||((70 + 34.263) / 234.605)||/||((42.5 + 166.24) / 738.076)|
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|
|=||(-260.648 - 11.933||-||29.157)||/||234.605|
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 -8.96 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