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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 -2.87.
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 * 0.9944||+||0.528 * 1.2099||+||0.404 * 1.0215||+||0.892 * 1.0155||+||0.115 * 0.8906|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1001||+||4.679 * -0.0817||-||0.327 * 0.9225|
|This Year (Jul15) TTM:||Last Year (Jul14) TTM:|
|Accounts Receivable was $276 Mil.|
Revenue was 314.03 + 320.042 + 306.283 + 296.981 = $1,237 Mil.
Gross Profit was 87.377 + 89.218 + 77.953 + 84.92 = $339 Mil.
Total Current Assets was $1,076 Mil.
Total Assets was $1,568 Mil.
Property, Plant and Equipment(Net PPE) was $322 Mil.
Depreciation, Depletion and Amortization(DDA) was $94 Mil.
Selling, General & Admin. Expense(SGA) was $119 Mil.
Total Current Liabilities was $217 Mil.
Long-Term Debt was $224 Mil.
Net Income was 3.393 + 7.327 + 1.679 + -11.362 = $1 Mil.
Non Operating Income was 0.881 + 4.042 + 2.05 + 0.033 = $7 Mil.
Cash Flow from Operations was 34.598 + 39.104 + 39.618 + 8.861 = $122 Mil.
|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.
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)|
|=||(275.605 / 1237.336)||/||(272.907 / 1218.403)|
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)|
|=||(89.218 / 1218.403)||/||(87.377 / 1237.336)|
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 - (1076.039 + 322.043) / 1567.86)||/||(1 - (1078.993 + 301.02) / 1543.652)|
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))|
|=||(75.795 / (75.795 + 301.02))||/||(93.953 / (93.953 + 322.043))|
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)|
|=||(118.76 / 1237.336)||/||(106.3 / 1218.403)|
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)|
|=||((223.76 + 217.225) / 1567.86)||/||((214.496 + 256.141) / 1543.652)|
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|
|=||(1.037 - 7.006||-||122.181)||/||1567.86|
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 -2.74 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