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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.
Finisar Corp has a M-score of -2.39 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Finisar Corp was -1.85. The lowest was -10.51. And the median was -2.95.
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 Finisar 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 * 1.2579||+||0.528 * 0.8016||+||0.404 * 0.8133||+||0.892 * 1.2381||+||0.115 * 1.1825|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9189||+||4.679 * 0.0036||-||0.327 * 1.6975|
|This Year (Apr14) TTM:||Last Year (Apr13) TTM:|
|Accounts Receivable was $259 Mil.|
Revenue was 306.025 + 294.018 + 290.722 + 266.068 = $1,157 Mil.
Gross Profit was 96.564 + 105.689 + 103.373 + 91.373 = $397 Mil.
Total Current Assets was $1,065 Mil.
Total Assets was $1,498 Mil.
Property, Plant and Equipment(Net PPE) was $273 Mil.
Depreciation, Depletion and Amortization(DDA) was $70 Mil.
Selling, General & Admin. Expense(SGA) was $100 Mil.
Total Current Liabilities was $246 Mil.
Long-Term Debt was $212 Mil.
Net Income was 28.75 + 27.061 + 29.965 + 26.011 = $112 Mil.
Non Operating Income was 8.124 + -1.873 + 0.495 + 0.488 = $7 Mil.
Cash Flow from Operations was 14.201 + 14.585 + 49.598 + 20.731 = $99 Mil.
|Accounts Receivable was $166 Mil.
Revenue was 243.417 + 238.351 + 232.041 + 220.526 = $934 Mil.
Gross Profit was 67.326 + 68.044 + 63.874 + 57.797 = $257 Mil.
Total Current Assets was $674 Mil.
Total Assets was $1,008 Mil.
Property, Plant and Equipment(Net PPE) was $201 Mil.
Depreciation, Depletion and Amortization(DDA) was $64 Mil.
Selling, General & Admin. Expense(SGA) was $88 Mil.
Total Current Liabilities was $142 Mil.
Long-Term Debt was $40 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)|
|=||(258.769 / 1156.833)||/||(166.15 / 934.335)|
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)|
|=||(105.689 / 934.335)||/||(96.564 / 1156.833)|
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 - (1064.573 + 273.328) / 1497.546)||/||(1 - (674.298 + 201.442) / 1007.847)|
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))|
|=||(64.14 / (64.14 + 201.442))||/||(70.149 / (70.149 + 273.328))|
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)|
|=||(99.761 / 1156.833)||/||(87.684 / 934.335)|
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)|
|=||((212.253 + 246.43) / 1497.546)||/||((40.015 + 141.837) / 1007.847)|
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|
|=||(111.787 - 7.234||-||99.115)||/||1497.546|
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.
Finisar Corp has a M-score of -2.39 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
Finisar Corp Annual Data
Finisar Corp Quarterly Data