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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 Exar Corp was 4.06. The lowest was -6.47. And the median was -2.71.
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 Exar Corp 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 * 0.3673||+||0.528 * 0.9681||+||0.404 * 0.3107||+||0.892 * 1.2913||+||0.115 * 0.439|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9921||+||4.679 * 0.1222||-||0.327 * 0.5876|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $12.8 Mil.|
Revenue was 27.222 + 27.601 + 27.136 + 73.13 = $155.1 Mil.
Gross Profit was 13.456 + 13.193 + 13.362 + 27.152 = $67.2 Mil.
Total Current Assets was $272.8 Mil.
Total Assets was $323.5 Mil.
Property, Plant and Equipment(Net PPE) was $3.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $17.3 Mil.
Selling, General & Admin. Expense(SGA) was $41.0 Mil.
Total Current Liabilities was $28.2 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 45.379 + 1.008 + 8.94 + -2.182 = $53.1 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 1.109 + 5.536 + 4.144 + 2.821 = $13.6 Mil.
|Accounts Receivable was $27.1 Mil.
Revenue was 25.31 + 22.755 + 28.183 + 43.857 = $120.1 Mil.
Gross Profit was 10.975 + 8.553 + 12.878 + 17.948 = $50.4 Mil.
Total Current Assets was $115.8 Mil.
Total Assets was $257.1 Mil.
Property, Plant and Equipment(Net PPE) was $21.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $12.0 Mil.
Selling, General & Admin. Expense(SGA) was $32.0 Mil.
Total Current Liabilities was $36.5 Mil.
Long-Term Debt was $1.7 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)|
|=||(12.842 / 155.089)||/||(27.079 / 120.105)|
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)|
|=||(50.354 / 120.105)||/||(67.163 / 155.089)|
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 - (272.765 + 3.926) / 323.511)||/||(1 - (115.759 + 21.567) / 257.094)|
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))|
|=||(12.007 / (12.007 + 21.567))||/||(17.262 / (17.262 + 3.926))|
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)|
|=||(40.97 / 155.089)||/||(31.981 / 120.105)|
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 + 28.243) / 323.511)||/||((1.714 + 36.482) / 257.094)|
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|
|=||(53.145 - 0||-||13.61)||/||323.511|
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.
Exar Corp has a M-score of -2.45 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
Exar Corp Annual Data
Exar Corp Quarterly Data