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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 * 1.7956||+||0.528 * 1.2038||+||0.404 * 2.8592||+||0.892 * 1.1771||+||0.115 * 1.0491|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0894||+||4.679 * 0.0009||-||0.327 * 2.6783|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $77.5 Mil.|
Revenue was 123.299 + 83.083 + 53.611 + 71.782 = $331.8 Mil.
Gross Profit was 27.188 + 25.427 + 9.792 + 21.19 = $83.6 Mil.
Total Current Assets was $260.1 Mil.
Total Assets was $650.3 Mil.
Property, Plant and Equipment(Net PPE) was $42.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $39.5 Mil.
Selling, General & Admin. Expense(SGA) was $60.3 Mil.
Total Current Liabilities was $85.0 Mil.
Long-Term Debt was $137.8 Mil.
Net Income was -14.198 + 36.884 + -13.8 + -0.619 = $8.3 Mil.
Non Operating Income was -1.042 + -0.302 + -0.314 + -0.037 = $-1.7 Mil.
Cash Flow from Operations was 6.078 + -0.558 + -3.032 + 6.921 = $9.4 Mil.
|Accounts Receivable was $36.7 Mil.
Revenue was 65.862 + 73.885 + 70.829 + 71.285 = $281.9 Mil.
Gross Profit was 18.455 + 23.303 + 22.789 + 20.948 = $85.5 Mil.
Total Current Assets was $256.1 Mil.
Total Assets was $344.2 Mil.
Property, Plant and Equipment(Net PPE) was $23.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $24.2 Mil.
Selling, General & Admin. Expense(SGA) was $47.0 Mil.
Total Current Liabilities was $44.0 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)|
|=||(77.53 / 331.775)||/||(36.682 / 281.861)|
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)|
|=||(85.495 / 281.861)||/||(83.597 / 331.775)|
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 - (260.077 + 42.678) / 650.312)||/||(1 - (256.051 + 23.821) / 344.212)|
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))|
|=||(24.211 / (24.211 + 23.821))||/||(39.47 / (39.47 + 42.678))|
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)|
|=||(60.271 / 331.775)||/||(47.002 / 281.861)|
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)|
|=||((137.777 + 85.03) / 650.312)||/||((0 + 44.032) / 344.212)|
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|
|=||(8.267 - -1.695||-||9.409)||/||650.312|
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 -1.29 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