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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 -4.18. And the median was -2.41.
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 * 1.4065||+||0.528 * 1.1352||+||0.404 * 2.9263||+||0.892 * 1.3596||+||0.115 * 0.9542|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1981||+||4.679 * -0.0345||-||0.327 * 2.6449|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $70.2 Mil.|
Revenue was 123.888 + 123.299 + 83.083 + 53.611 = $383.9 Mil.
Gross Profit was 40.275 + 27.188 + 25.427 + 9.792 = $102.7 Mil.
Total Current Assets was $254.7 Mil.
Total Assets was $619.0 Mil.
Property, Plant and Equipment(Net PPE) was $42.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $46.8 Mil.
Selling, General & Admin. Expense(SGA) was $73.4 Mil.
Total Current Liabilities was $82.7 Mil.
Long-Term Debt was $125.5 Mil.
Net Income was -15.444 + -14.198 + 36.884 + -13.8 = $-6.6 Mil.
Non Operating Income was -0.946 + -1.042 + -0.302 + -0.314 = $-2.6 Mil.
Cash Flow from Operations was 14.935 + 6.078 + -0.558 + -3.032 = $17.4 Mil.
|Accounts Receivable was $36.7 Mil.
Revenue was 71.782 + 65.862 + 73.885 + 70.829 = $282.4 Mil.
Gross Profit was 21.19 + 18.455 + 23.303 + 22.789 = $85.7 Mil.
Total Current Assets was $258.0 Mil.
Total Assets was $342.7 Mil.
Property, Plant and Equipment(Net PPE) was $23.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $23.8 Mil.
Selling, General & Admin. Expense(SGA) was $45.1 Mil.
Total Current Liabilities was $43.6 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)|
|=||(70.225 / 383.881)||/||(36.725 / 282.358)|
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)|
|=||(85.737 / 282.358)||/||(102.682 / 383.881)|
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 - (254.709 + 42.663) / 618.982)||/||(1 - (258.018 + 23.853) / 342.723)|
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))|
|=||(23.771 / (23.771 + 23.853))||/||(46.798 / (46.798 + 42.663))|
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)|
|=||(73.445 / 383.881)||/||(45.088 / 282.358)|
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)|
|=||((125.475 + 82.707) / 618.982)||/||((0 + 43.581) / 342.723)|
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|
|=||(-6.558 - -2.604||-||17.423)||/||618.982|
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 -1.67 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