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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 -4.22. And the median was -2.67.
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 * 1.0783||+||0.528 * 1.62||+||0.404 * 2.5624||+||0.892 * 1.1377||+||0.115 * 1.2779|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0582||+||4.679 * -0.0983||-||0.327 * 1.4172|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $28.7 Mil.|
Revenue was 44.315 + 43.159 + 30.719 + 27.987 = $146.2 Mil.
Gross Profit was 16.89 + 4.132 + 10.956 + 8.422 = $40.4 Mil.
Total Current Assets was $120.7 Mil.
Total Assets was $277.5 Mil.
Property, Plant and Equipment(Net PPE) was $20.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $16.9 Mil.
Selling, General & Admin. Expense(SGA) was $41.0 Mil.
Total Current Liabilities was $49.9 Mil.
Long-Term Debt was $1.5 Mil.
Net Income was -6.599 + -23.352 + -12.105 + 0.147 = $-41.9 Mil.
Non Operating Income was 0 + 0 + 0 + -0.323 = $-0.3 Mil.
Cash Flow from Operations was -5.914 + -1.96 + -8.137 + 1.708 = $-14.3 Mil.
|Accounts Receivable was $23.4 Mil.
Revenue was 30.69 + 34.018 + 32.627 + 31.154 = $128.5 Mil.
Gross Profit was 12.826 + 13.929 + 15.477 + 15.296 = $57.5 Mil.
Total Current Assets was $240.8 Mil.
Total Assets was $308.7 Mil.
Property, Plant and Equipment(Net PPE) was $8.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $11.9 Mil.
Selling, General & Admin. Expense(SGA) was $34.0 Mil.
Total Current Liabilities was $40.2 Mil.
Long-Term Debt was $0.1 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)|
|=||(28.688 / 146.18)||/||(23.384 / 128.489)|
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)|
|=||(4.132 / 128.489)||/||(16.89 / 146.18)|
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 - (120.728 + 20.673) / 277.466)||/||(1 - (240.834 + 8.784) / 308.696)|
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))|
|=||(11.862 / (11.862 + 8.784))||/||(16.886 / (16.886 + 20.673))|
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)|
|=||(40.963 / 146.18)||/||(34.024 / 128.489)|
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)|
|=||((1.479 + 49.869) / 277.466)||/||((0.106 + 40.205) / 308.696)|
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|
|=||(-41.909 - -0.323||-||-14.303)||/||277.466|
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 -1.90 signals that the company is likely to 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