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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.
Fabrinet has a M-score of -2.03 signals that the company is a manipulator.
During the past 8 years, the highest Beneish M-Score of Fabrinet was -1.99. The lowest was -4.09. And the median was -2.65.
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 Fabrinet 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 * 0.8881||+||0.528 * 0.9974||+||0.404 * 0.8084||+||0.892 * 1.0854||+||0.115 * 0.9928|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.213||+||4.679 * 0.0711||-||0.327 * 0.7379|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $118.5 Mil.|
Revenue was 167.657 + 178.562 + 171.551 + 159.934 = $677.7 Mil.
Gross Profit was 17.283 + 20.53 + 18.645 + 17.071 = $73.5 Mil.
Total Current Assets was $466.2 Mil.
Total Assets was $568.1 Mil.
Property, Plant and Equipment(Net PPE) was $98.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.3 Mil.
Selling, General & Admin. Expense(SGA) was $28.4 Mil.
Total Current Liabilities was $136.0 Mil.
Long-Term Debt was $12.0 Mil.
Net Income was 47.662 + 14.539 + 19.197 + 15.142 = $96.5 Mil.
Non Operating Income was -0.081 + -0.601 + 1.272 + -0.551 = $0.0 Mil.
Cash Flow from Operations was 21.8 + 18.667 + 18.137 + -2.507 = $56.1 Mil.
|Accounts Receivable was $122.9 Mil.
Revenue was 155.557 + 167.426 + 158.625 + 142.757 = $624.4 Mil.
Gross Profit was 16.255 + 18.37 + 17.722 + 15.22 = $67.6 Mil.
Total Current Assets was $387.1 Mil.
Total Assets was $488.5 Mil.
Property, Plant and Equipment(Net PPE) was $98.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.1 Mil.
Selling, General & Admin. Expense(SGA) was $122.6 Mil.
Total Current Liabilities was $150.8 Mil.
Long-Term Debt was $21.7 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)|
|=||(118.5 / 677.704)||/||(122.926 / 624.365)|
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)|
|=||(20.53 / 624.365)||/||(17.283 / 677.704)|
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 - (466.223 + 98.782) / 568.094)||/||(1 - (387.071 + 98.173) / 488.53)|
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))|
|=||(10.127 / (10.127 + 98.173))||/||(10.271 / (10.271 + 98.782))|
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)|
|=||(28.351 / 677.704)||/||(122.634 / 624.365)|
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)|
|=||((12 + 135.969) / 568.094)||/||((21.66 + 150.775) / 488.53)|
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|
|=||(96.54 - 0.039||-||56.097)||/||568.094|
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.
Fabrinet has a M-score of -2.03 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
Fabrinet Annual Data
Fabrinet Quarterly Data