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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 -12.97. And the median was -3.33.
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 * 0.4277||+||0.528 * 1.289||+||0.404 * 0.6224||+||0.892 * 0.8354||+||0.115 * 0.886|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0047||+||4.679 * -2.1234||-||0.327 * 0.5842|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $11.4 Mil.|
Revenue was 33.21 + 42.981 + 41.315 + 89.766 = $207.3 Mil.
Gross Profit was 16.373 + 22.303 + 24.553 + 33.451 = $96.7 Mil.
Total Current Assets was $66.3 Mil.
Total Assets was $138.5 Mil.
Property, Plant and Equipment(Net PPE) was $20.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $49.6 Mil.
Selling, General & Admin. Expense(SGA) was $75.6 Mil.
Total Current Liabilities was $26.2 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -6.749 + -18.23 + -223.838 + -14.333 = $-263.2 Mil.
Non Operating Income was 2.827 + -0.082 + 0.782 + 0.822 = $4.3 Mil.
Cash Flow from Operations was -2.415 + 15.239 + 1.28 + 12.454 = $26.6 Mil.
|Accounts Receivable was $32.0 Mil.
Revenue was 45.056 + 51.232 + 50.745 + 101.066 = $248.1 Mil.
Gross Profit was 29.433 + 32.517 + 34.722 + 52.491 = $149.2 Mil.
Total Current Assets was $266.2 Mil.
Total Assets was $772.6 Mil.
Property, Plant and Equipment(Net PPE) was $39.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $67.4 Mil.
Selling, General & Admin. Expense(SGA) was $90.1 Mil.
Total Current Liabilities was $173.0 Mil.
Long-Term Debt was $77.5 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)|
|=||(11.426 / 207.272)||/||(31.977 / 248.099)|
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)|
|=||(22.303 / 248.099)||/||(16.373 / 207.272)|
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 - (66.307 + 20.093) / 138.486)||/||(1 - (266.203 + 39.49) / 772.578)|
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))|
|=||(67.411 / (67.411 + 39.49))||/||(49.618 / (49.618 + 20.093))|
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)|
|=||(75.595 / 207.272)||/||(90.058 / 248.099)|
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 + 26.228) / 138.486)||/||((77.5 + 172.976) / 772.578)|
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|
|=||(-263.15 - 4.349||-||26.558)||/||138.486|
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 -12.97 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