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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 FormFactor Inc was 10.98. The lowest was -4.52. And the median was -2.47.
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 FormFactor Inc 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 * 2.0699||+||0.528 * 1.1525||+||0.404 * 2.7213||+||0.892 * 0.9462||+||0.115 * 1.5336|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.039||+||4.679 * 0.0126||-||0.327 * 2.7735|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $86.1 Mil.|
Revenue was 83.083 + 53.611 + 71.782 + 65.862 = $274.3 Mil.
Gross Profit was 25.427 + 9.792 + 21.19 + 18.455 = $74.9 Mil.
Total Current Assets was $284.4 Mil.
Total Assets was $695.3 Mil.
Property, Plant and Equipment(Net PPE) was $43.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $22.3 Mil.
Selling, General & Admin. Expense(SGA) was $48.4 Mil.
Total Current Liabilities was $118.8 Mil.
Long-Term Debt was $141.4 Mil.
Net Income was 36.884 + -13.8 + -0.619 + -2.525 = $19.9 Mil.
Non Operating Income was -0.302 + -0.314 + -0.037 + 0.982 = $0.3 Mil.
Cash Flow from Operations was -0.558 + -3.032 + 6.921 + 7.531 = $10.9 Mil.
|Accounts Receivable was $44.0 Mil.
Revenue was 73.885 + 70.829 + 71.285 + 73.933 = $289.9 Mil.
Gross Profit was 23.303 + 22.789 + 20.948 + 24.142 = $91.2 Mil.
Total Current Assets was $256.6 Mil.
Total Assets was $348.8 Mil.
Property, Plant and Equipment(Net PPE) was $24.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $26.2 Mil.
Selling, General & Admin. Expense(SGA) was $49.2 Mil.
Total Current Liabilities was $47.1 Mil.
Long-Term Debt was $0.0 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)|
|=||(86.137 / 274.338)||/||(43.979 / 289.932)|
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)|
|=||(91.182 / 289.932)||/||(74.864 / 274.338)|
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 - (284.438 + 43.791) / 695.256)||/||(1 - (256.614 + 24.485) / 348.753)|
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))|
|=||(26.214 / (26.214 + 24.485))||/||(22.273 / (22.273 + 43.791))|
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)|
|=||(48.371 / 274.338)||/||(49.203 / 289.932)|
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)|
|=||((141.417 + 118.758) / 695.256)||/||((0 + 47.055) / 348.753)|
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|
|=||(19.94 - 0.329||-||10.862)||/||695.256|
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.
FormFactor Inc has a M-score of -1.23 signals that the company is likely to 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
FormFactor Inc Annual Data
FormFactor Inc Quarterly Data