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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 10 years, the highest Beneish M-Score of Fabrinet was -1.19. The lowest was -3.43. 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 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 * 1.5152||+||0.528 * 0.9458||+||0.404 * 1.4863||+||0.892 * 0.8542||+||0.115 * 1.1346|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.3018||+||4.679 * -0.0139||-||0.327 * 1.1757|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $139.7 Mil.|
Revenue was 216.433 + 0 + 189.453 + 188.353 = $594.2 Mil.
Gross Profit was 26.011 + 0 + 21.657 + 21.061 = $68.7 Mil.
Total Current Assets was $536.4 Mil.
Total Assets was $688.2 Mil.
Property, Plant and Equipment(Net PPE) was $144.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $14.1 Mil.
Selling, General & Admin. Expense(SGA) was $33.0 Mil.
Total Current Liabilities was $193.1 Mil.
Long-Term Debt was $3.0 Mil.
Net Income was 1.603 + 0 + 10.845 + 8.726 = $21.2 Mil.
Non Operating Income was -10.389 + 0 + -0.162 + -0.051 = $-10.6 Mil.
Cash Flow from Operations was 4.539 + 12.148 + 9.88 + 14.768 = $41.3 Mil.
|Accounts Receivable was $107.9 Mil.
Revenue was 189.325 + 160.084 + 167.657 + 178.562 = $695.6 Mil.
Gross Profit was 20.506 + 17.775 + 17.283 + 20.53 = $76.1 Mil.
Total Current Assets was $487.0 Mil.
Total Assets was $589.5 Mil.
Property, Plant and Equipment(Net PPE) was $98.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $11.0 Mil.
Selling, General & Admin. Expense(SGA) was $29.7 Mil.
Total Current Liabilities was $133.9 Mil.
Long-Term Debt was $9.0 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)|
|=||(139.715 / 594.239)||/||(107.943 / 695.628)|
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)|
|=||(0 / 695.628)||/||(26.011 / 594.239)|
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 - (536.443 + 144.148) / 688.2)||/||(1 - (487.045 + 98.058) / 589.488)|
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))|
|=||(11.029 / (11.029 + 98.058))||/||(14.102 / (14.102 + 144.148))|
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)|
|=||(33.037 / 594.239)||/||(29.707 / 695.628)|
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)|
|=||((3 + 193.102) / 688.2)||/||((9 + 133.869) / 589.488)|
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|
|=||(21.174 - -10.602||-||41.335)||/||688.2|
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 -2.13 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