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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 -1.85. The lowest was -10.42. And the median was -2.90.
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 * 0.9073||+||0.528 * 1.2234||+||0.404 * 1.0387||+||0.892 * 1.0814||+||0.115 * 0.9047|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1034||+||4.679 * -0.0682||-||0.327 * 0.8982|
|This Year (Apr15) TTM:||Last Year (Apr14) TTM:|
|Accounts Receivable was $254 Mil.|
Revenue was 320.042 + 306.283 + 296.981 + 327.638 = $1,251 Mil.
Gross Profit was 89.218 + 77.953 + 84.92 + 98.819 = $351 Mil.
Total Current Assets was $1,064 Mil.
Total Assets was $1,552 Mil.
Property, Plant and Equipment(Net PPE) was $316 Mil.
Depreciation, Depletion and Amortization(DDA) was $92 Mil.
Selling, General & Admin. Expense(SGA) was $119 Mil.
Total Current Liabilities was $206 Mil.
Long-Term Debt was $221 Mil.
Net Income was 7.327 + 1.679 + -11.362 + 14.243 = $12 Mil.
Non Operating Income was 4.042 + 2.05 + 0.033 + -2.026 = $4 Mil.
Cash Flow from Operations was 39.104 + 39.618 + 8.861 + 26.014 = $114 Mil.
|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.
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)|
|=||(253.884 / 1250.944)||/||(258.769 / 1156.833)|
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)|
|=||(77.953 / 1156.833)||/||(89.218 / 1250.944)|
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 - (1064.263 + 315.777) / 1551.882)||/||(1 - (1064.573 + 273.328) / 1497.546)|
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))|
|=||(70.149 / (70.149 + 273.328))||/||(92.073 / (92.073 + 315.777))|
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)|
|=||(119.034 / 1250.944)||/||(99.761 / 1156.833)|
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)|
|=||((221.406 + 205.517) / 1551.882)||/||((212.253 + 246.43) / 1497.546)|
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|
|=||(11.887 - 4.099||-||113.597)||/||1551.882|
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 -2.67 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