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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 3199.47. The lowest was -7.40. And the median was -2.36.
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 * 1.0689||+||0.528 * 1.1187||+||0.404 * 1.0828||+||0.892 * 1.0389||+||0.115 * 0.9525|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9786||+||4.679 * -0.0109||-||0.327 * 1.0733|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $26.6 Mil.|
Revenue was 30.527 + 26.578 + 27.424 + 28.729 = $113.3 Mil.
Gross Profit was 10.413 + 7.645 + 9.957 + 10.416 = $38.4 Mil.
Total Current Assets was $49.4 Mil.
Total Assets was $98.1 Mil.
Property, Plant and Equipment(Net PPE) was $1.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.2 Mil.
Selling, General & Admin. Expense(SGA) was $34.2 Mil.
Total Current Liabilities was $19.6 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 0.494 + -0.94 + 0.656 + 0.976 = $1.2 Mil.
Non Operating Income was -0.504 + 0.12 + 0.019 + 0.146 = $-0.2 Mil.
Cash Flow from Operations was 0.945 + -3.419 + 0.38 + 4.569 = $2.5 Mil.
|Accounts Receivable was $23.9 Mil.
Revenue was 29.222 + 27.614 + 26.781 + 25.399 = $109.0 Mil.
Gross Profit was 10.886 + 10.107 + 10.734 + 9.657 = $41.4 Mil.
Total Current Assets was $48.4 Mil.
Total Assets was $90.2 Mil.
Property, Plant and Equipment(Net PPE) was $1.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.3 Mil.
Selling, General & Admin. Expense(SGA) was $33.6 Mil.
Total Current Liabilities was $16.8 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)|
|=||(26.565 / 113.258)||/||(23.922 / 109.016)|
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)|
|=||(7.645 / 109.016)||/||(10.413 / 113.258)|
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 - (49.369 + 1.011) / 98.091)||/||(1 - (48.44 + 1.235) / 90.19)|
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))|
|=||(1.33 / (1.33 + 1.235))||/||(1.208 / (1.208 + 1.011))|
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)|
|=||(34.167 / 113.258)||/||(33.607 / 109.016)|
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 + 19.622) / 98.091)||/||((0 + 16.809) / 90.19)|
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|
|=||(1.186 - -0.219||-||2.475)||/||98.091|
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 -2.36 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