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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 Finisar Corp was 138.64. The lowest was -10.56. And the median was -2.93.
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 * 0.9719||+||0.528 * 1.0085||+||0.404 * 0.9239||+||0.892 * 1.1792||+||0.115 * 1.0421|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1403||+||4.679 * -0.0061||-||0.327 * 1.4187|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $214 Mil.|
Revenue was 296.981 + 327.638 + 306.025 + 294.018 = $1,225 Mil.
Gross Profit was 84.92 + 98.819 + 96.564 + 105.689 = $386 Mil.
Total Current Assets was $1,049 Mil.
Total Assets was $1,518 Mil.
Property, Plant and Equipment(Net PPE) was $306 Mil.
Depreciation, Depletion and Amortization(DDA) was $82 Mil.
Selling, General & Admin. Expense(SGA) was $119 Mil.
Total Current Liabilities was $231 Mil.
Long-Term Debt was $217 Mil.
Net Income was -11.362 + 14.243 + 28.75 + 27.061 = $59 Mil.
Non Operating Income was 0.033 + -2.026 + 8.124 + -1.873 = $4 Mil.
Cash Flow from Operations was 8.861 + 26.014 + 14.201 + 14.585 = $64 Mil.
|Accounts Receivable was $186 Mil.
Revenue was 290.722 + 266.068 + 243.417 + 238.351 = $1,039 Mil.
Gross Profit was 103.373 + 91.373 + 67.326 + 68.044 = $330 Mil.
Total Current Assets was $781 Mil.
Total Assets was $1,145 Mil.
Property, Plant and Equipment(Net PPE) was $231 Mil.
Depreciation, Depletion and Amortization(DDA) was $65 Mil.
Selling, General & Admin. Expense(SGA) was $88 Mil.
Total Current Liabilities was $238 Mil.
Long-Term Debt was $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)|
|=||(213.721 / 1224.662)||/||(186.486 / 1038.558)|
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)|
|=||(98.819 / 1038.558)||/||(84.92 / 1224.662)|
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 - (1048.578 + 306.331) / 1518.227)||/||(1 - (781.002 + 231.022) / 1145.384)|
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))|
|=||(65.448 / (65.448 + 231.022))||/||(82.336 / (82.336 + 306.331))|
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)|
|=||(118.849 / 1224.662)||/||(88.385 / 1038.558)|
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)|
|=||((216.775 + 231.328) / 1518.227)||/||((0 + 238.295) / 1145.384)|
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|
|=||(58.692 - 4.258||-||63.661)||/||1518.227|
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 -2.56 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