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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 13 years, the highest Beneish M-Score of Edgewater Technology Inc was 7757.99. The lowest was -9.92. And the median was -2.51.
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 Edgewater Technology 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 * 0.9324||+||0.528 * 0.9781||+||0.404 * 1.2155||+||0.892 * 1.0817||+||0.115 * 0.7017|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.993||+||4.679 * -0.0487||-||0.327 * 1.1976|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $28.0 Mil.|
Revenue was 30.826 + 34.024 + 31.898 + 28.415 = $125.2 Mil.
Gross Profit was 10.64 + 12.814 + 10.75 + 9.776 = $44.0 Mil.
Total Current Assets was $41.5 Mil.
Total Assets was $105.4 Mil.
Property, Plant and Equipment(Net PPE) was $0.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $3.8 Mil.
Selling, General & Admin. Expense(SGA) was $37.2 Mil.
Total Current Liabilities was $22.1 Mil.
Long-Term Debt was $5.0 Mil.
Net Income was 0.043 + 1.313 + -0.763 + -4.641 = $-4.0 Mil.
Non Operating Income was -0.568 + -0.568 + -0.625 + -0.739 = $-2.5 Mil.
Cash Flow from Operations was 1.1 + 5.231 + -5.153 + 2.411 = $3.6 Mil.
|Accounts Receivable was $27.7 Mil.
Revenue was 31.184 + 30.527 + 26.578 + 27.424 = $115.7 Mil.
Gross Profit was 11.756 + 10.413 + 7.645 + 9.957 = $39.8 Mil.
Total Current Assets was $51.0 Mil.
Total Assets was $102.5 Mil.
Property, Plant and Equipment(Net PPE) was $0.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.3 Mil.
Selling, General & Admin. Expense(SGA) was $34.6 Mil.
Total Current Liabilities was $22.0 Mil.
Long-Term Debt was $0.0 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)|
|=||(27.951 / 125.163)||/||(27.714 / 115.713)|
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)|
|=||(39.771 / 115.713)||/||(43.98 / 125.163)|
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 - (41.496 + 0.705) / 105.436)||/||(1 - (50.999 + 0.926) / 102.502)|
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))|
|=||(1.343 / (1.343 + 0.926))||/||(3.8 / (3.8 + 0.705))|
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)|
|=||(37.208 / 125.163)||/||(34.641 / 115.713)|
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)|
|=||((5 + 22.071) / 105.436)||/||((0 + 21.976) / 102.502)|
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|
|=||(-4.048 - -2.5||-||3.589)||/||105.436|
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.
Edgewater Technology Inc has a M-score of -2.72 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
Edgewater Technology Inc Annual Data
Edgewater Technology Inc Quarterly Data