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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 11 years, the highest Beneish M-Score of Entropic Communications Inc was 0.94. The lowest was -11.01. And the median was -3.34.
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 Entropic Communications 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 * 1.2456||+||0.528 * 0.9856||+||0.404 * 0.5671||+||0.892 * 0.7388||+||0.115 * 0.9973|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.3631||+||4.679 * -0.3515||-||0.327 * 1.6845|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $27.8 Mil.|
Revenue was 42.586 + 43.178 + 50.2 + 55.655 = $191.6 Mil.
Gross Profit was 21.082 + 22.569 + 23.538 + 26.062 = $93.3 Mil.
Total Current Assets was $142.2 Mil.
Total Assets was $210.9 Mil.
Property, Plant and Equipment(Net PPE) was $17.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $19.4 Mil.
Selling, General & Admin. Expense(SGA) was $47.6 Mil.
Total Current Liabilities was $26.5 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -25.385 + -27.637 + -21.849 + -23.253 = $-98.1 Mil.
Non Operating Income was 0.432 + 0.176 + 0.192 + 0.081 = $0.9 Mil.
Cash Flow from Operations was -1.942 + -2 + -11.625 + -9.295 = $-24.9 Mil.
|Accounts Receivable was $30.2 Mil.
Revenue was 57.931 + 56.376 + 70.612 + 74.457 = $259.4 Mil.
Gross Profit was 27.794 + 27.513 + 34.256 + 34.839 = $124.4 Mil.
Total Current Assets was $150.7 Mil.
Total Assets was $295.3 Mil.
Property, Plant and Equipment(Net PPE) was $18.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $20.0 Mil.
Selling, General & Admin. Expense(SGA) was $47.3 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)|
|=||(27.795 / 191.619)||/||(30.204 / 259.376)|
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)|
|=||(22.569 / 259.376)||/||(21.082 / 191.619)|
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 - (142.24 + 17.413) / 210.915)||/||(1 - (150.717 + 17.994) / 295.26)|
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))|
|=||(19.97 / (19.97 + 17.994))||/||(19.434 / (19.434 + 17.413))|
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)|
|=||(47.629 / 191.619)||/||(47.297 / 259.376)|
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 + 26.468) / 210.915)||/||((0 + 21.996) / 295.26)|
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|
|=||(-98.124 - 0.881||-||-24.862)||/||210.915|
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.
Entropic Communications Inc has a M-score of -4.60 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
Entropic Communications Inc Annual Data
Entropic Communications Inc Quarterly Data