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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 -2.86.
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 * 1.045||+||0.528 * 1.157||+||0.404 * 0.9224||+||0.892 * 1.0301||+||0.115 * 0.989|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8706||+||4.679 * -0.1043||-||0.327 * 0.9598|
|This Year (Oct15) TTM:||Last Year (Oct14) TTM:|
|Accounts Receivable was $230 Mil.|
Revenue was 321.136 + 314.03 + 320.042 + 306.283 = $1,261 Mil.
Gross Profit was 89.091 + 87.377 + 89.218 + 77.953 = $344 Mil.
Total Current Assets was $1,076 Mil.
Total Assets was $1,577 Mil.
Property, Plant and Equipment(Net PPE) was $345 Mil.
Depreciation, Depletion and Amortization(DDA) was $94 Mil.
Selling, General & Admin. Expense(SGA) was $107 Mil.
Total Current Liabilities was $221 Mil.
Long-Term Debt was $226 Mil.
Net Income was 6.644 + 3.393 + 7.327 + 1.679 = $19 Mil.
Non Operating Income was 0.445 + 0.881 + 4.042 + 2.05 = $7 Mil.
Cash Flow from Operations was 62.734 + 34.598 + 39.104 + 39.618 = $176 Mil.
|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.
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)|
|=||(230.065 / 1261.491)||/||(213.721 / 1224.662)|
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)|
|=||(87.377 / 1224.662)||/||(89.091 / 1261.491)|
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 - (1076.061 + 344.695) / 1577.254)||/||(1 - (1048.578 + 306.331) / 1518.227)|
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))|
|=||(82.336 / (82.336 + 306.331))||/||(93.958 / (93.958 + 344.695))|
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)|
|=||(106.583 / 1261.491)||/||(118.849 / 1224.662)|
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)|
|=||((226.151 + 220.639) / 1577.254)||/||((216.775 + 231.328) / 1518.227)|
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|
|=||(19.043 - 7.418||-||176.054)||/||1577.254|
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 -2.81 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