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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 -12.60. And the median was -3.54.
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 * 0.5633||+||0.528 * 1.2898||+||0.404 * 0.6243||+||0.892 * 0.8688||+||0.115 * 0.8388|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9797||+||4.679 * -2.0708||-||0.327 * 0.6736|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $14.5 Mil.|
Revenue was 42.981 + 41.315 + 89.766 + 89.752 = $263.8 Mil.
Gross Profit was 22.303 + 24.553 + 33.451 + 35.66 = $116.0 Mil.
Total Current Assets was $69.8 Mil.
Total Assets was $149.6 Mil.
Property, Plant and Equipment(Net PPE) was $22.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $59.5 Mil.
Selling, General & Admin. Expense(SGA) was $87.3 Mil.
Total Current Liabilities was $32.6 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -18.23 + -223.838 + -14.333 + -10.956 = $-267.4 Mil.
Non Operating Income was -0.082 + 0.782 + 0.822 + 6.164 = $7.7 Mil.
Cash Flow from Operations was 15.239 + 1.28 + 12.454 + 5.688 = $34.7 Mil.
|Accounts Receivable was $29.6 Mil.
Revenue was 51.232 + 50.745 + 101.066 + 100.62 = $303.7 Mil.
Gross Profit was 32.517 + 34.722 + 52.491 + 52.443 = $172.2 Mil.
Total Current Assets was $260.9 Mil.
Total Assets was $777.1 Mil.
Property, Plant and Equipment(Net PPE) was $42.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $64.9 Mil.
Selling, General & Admin. Expense(SGA) was $102.5 Mil.
Total Current Liabilities was $169.9 Mil.
Long-Term Debt was $81.3 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)|
|=||(14.504 / 263.814)||/||(29.64 / 303.663)|
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)|
|=||(24.553 / 303.663)||/||(22.303 / 263.814)|
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 - (69.771 + 22.836) / 149.555)||/||(1 - (260.911 + 42.193) / 777.088)|
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))|
|=||(64.91 / (64.91 + 42.193))||/||(59.473 / (59.473 + 22.836))|
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)|
|=||(87.274 / 263.814)||/||(102.536 / 303.663)|
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 + 32.556) / 149.555)||/||((81.25 + 169.863) / 777.088)|
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|
|=||(-267.357 - 7.686||-||34.661)||/||149.555|
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 -12.60 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