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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 -3.39.
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 * 0.7317||+||0.528 * 1.3286||+||0.404 * 1.1752||+||0.892 * 0.7442||+||0.115 * 0.9943|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1711||+||4.679 * -0.5573||-||0.327 * 0.3636|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $9.6 Mil.|
Revenue was 28.505 + 29.768 + 33.21 + 42.981 = $134.5 Mil.
Gross Profit was 11.301 + 13.466 + 16.373 + 22.303 = $63.4 Mil.
Total Current Assets was $52.5 Mil.
Total Assets was $104.5 Mil.
Property, Plant and Equipment(Net PPE) was $15.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $40.5 Mil.
Selling, General & Admin. Expense(SGA) was $62.9 Mil.
Total Current Liabilities was $16.9 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -13.805 + -14.408 + -6.749 + -18.23 = $-53.2 Mil.
Non Operating Income was 0.178 + 0.019 + 2.827 + -0.082 = $2.9 Mil.
Cash Flow from Operations was -3.14 + -4.194 + -2.415 + 11.87 = $2.1 Mil.
|Accounts Receivable was $17.7 Mil.
Revenue was 41.315 + 43.077 + 45.056 + 51.232 = $180.7 Mil.
Gross Profit was 24.553 + 26.757 + 29.433 + 32.517 = $113.3 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 $72.2 Mil.
Total Current Liabilities was $34.3 Mil.
Long-Term Debt was $70.0 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)|
|=||(9.618 / 134.464)||/||(17.663 / 180.68)|
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)|
|=||(13.466 / 180.68)||/||(11.301 / 134.464)|
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 - (52.514 + 15.516) / 104.528)||/||(1 - (140.567 + 24.335) / 234.605)|
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))|
|=||(62.207 / (62.207 + 24.335))||/||(40.481 / (40.481 + 15.516))|
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)|
|=||(62.932 / 134.464)||/||(72.206 / 180.68)|
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 + 16.892) / 104.528)||/||((70 + 34.263) / 234.605)|
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|
|=||(-53.192 - 2.942||-||2.121)||/||104.528|
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 -5.14 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