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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 -2.51 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Finisar Corp was 138.64. The lowest was -10.61. 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 * 1.0644||+||0.528 * 0.8935||+||0.404 * 0.8616||+||0.892 * 1.2434||+||0.115 * 1.1641|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.02||+||4.679 * -0.0059||-||0.327 * 1.5719|
|This Year (Jul14) TTM:||Last Year (Jul13) TTM:|
|Accounts Receivable was $273 Mil.|
Revenue was 327.638 + 306.025 + 294.018 + 290.722 = $1,218 Mil.
Gross Profit was 98.819 + 96.564 + 105.689 + 103.373 = $404 Mil.
Total Current Assets was $1,079 Mil.
Total Assets was $1,544 Mil.
Property, Plant and Equipment(Net PPE) was $301 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $106 Mil.
Total Current Liabilities was $256 Mil.
Long-Term Debt was $214 Mil.
Net Income was 14.243 + 28.75 + 27.061 + 29.965 = $100 Mil.
Non Operating Income was -2.026 + 8.124 + -1.873 + 0.495 = $5 Mil.
Cash Flow from Operations was 26.014 + 14.201 + 14.585 + 49.598 = $104 Mil.
|Accounts Receivable was $206 Mil.
Revenue was 266.068 + 243.417 + 238.351 + 232.041 = $980 Mil.
Gross Profit was 91.373 + 67.326 + 68.044 + 63.874 = $291 Mil.
Total Current Assets was $721 Mil.
Total Assets was $1,065 Mil.
Property, Plant and Equipment(Net PPE) was $213 Mil.
Depreciation, Depletion and Amortization(DDA) was $65 Mil.
Selling, General & Admin. Expense(SGA) was $84 Mil.
Total Current Liabilities was $167 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)|
|=||(272.907 / 1218.403)||/||(206.209 / 979.877)|
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)|
|=||(96.564 / 979.877)||/||(98.819 / 1218.403)|
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 - (1078.993 + 301.02) / 1543.652)||/||(1 - (721.204 + 213.044) / 1065.315)|
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))|
|=||(65.307 / (65.307 + 213.044))||/||(75.988 / (75.988 + 301.02))|
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)|
|=||(106.3 / 1218.403)||/||(83.813 / 979.877)|
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)|
|=||((214.496 + 256.141) / 1543.652)||/||((40.015 + 166.613) / 1065.315)|
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|
|=||(100.019 - 4.72||-||104.398)||/||1543.652|
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 -2.51 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