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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 140.19. The lowest was -10.56. And the median was -2.84.
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 * 1.1238||+||0.528 * 1.0362||+||0.404 * 0.9018||+||0.892 * 1.0222||+||0.115 * 1.0441|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8941||+||4.679 * -0.0914||-||0.327 * 1.0282|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $241 Mil.|
Revenue was 309.206 + 321.136 + 314.03 + 320.042 = $1,264 Mil.
Gross Profit was 87.74 + 89.091 + 87.377 + 89.218 = $353 Mil.
Total Current Assets was $1,102 Mil.
Total Assets was $1,598 Mil.
Property, Plant and Equipment(Net PPE) was $343 Mil.
Depreciation, Depletion and Amortization(DDA) was $94 Mil.
Selling, General & Admin. Expense(SGA) was $108 Mil.
Total Current Liabilities was $222 Mil.
Long-Term Debt was $229 Mil.
Net Income was 12.084 + 6.644 + 3.393 + 7.327 = $29 Mil.
Non Operating Income was 1.968 + 0.445 + 0.881 + 4.042 = $7 Mil.
Cash Flow from Operations was 31.665 + 62.734 + 34.598 + 39.104 = $168 Mil.
|Accounts Receivable was $210 Mil.
Revenue was 306.283 + 296.981 + 327.638 + 306.025 = $1,237 Mil.
Gross Profit was 77.953 + 84.92 + 98.819 + 96.564 = $358 Mil.
Total Current Assets was $1,056 Mil.
Total Assets was $1,521 Mil.
Property, Plant and Equipment(Net PPE) was $305 Mil.
Depreciation, Depletion and Amortization(DDA) was $88 Mil.
Selling, General & Admin. Expense(SGA) was $119 Mil.
Total Current Liabilities was $198 Mil.
Long-Term Debt was $219 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)|
|=||(241.384 / 1264.414)||/||(210.116 / 1236.927)|
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)|
|=||(89.091 / 1236.927)||/||(87.74 / 1264.414)|
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 - (1102.28 + 342.818) / 1597.728)||/||(1 - (1055.647 + 304.547) / 1521.356)|
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))|
|=||(88.193 / (88.193 + 304.547))||/||(93.932 / (93.932 + 342.818))|
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)|
|=||(108.37 / 1264.414)||/||(118.572 / 1236.927)|
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)|
|=||((228.561 + 221.573) / 1597.728)||/||((219.072 + 197.796) / 1521.356)|
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|
|=||(29.448 - 7.336||-||168.101)||/||1597.728|
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 -2.78 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