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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 -2.43.
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 * 0.9679||+||0.528 * 0.6119||+||0.404 * 0.8663||+||0.892 * 1.0657||+||0.115 * 0.8417|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8529||+||4.679 * -0.1113||-||0.327 * 0.9691|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $47.8 Mil.|
Revenue was 73.933 + 67.352 + 55.959 + 48.546 = $245.8 Mil.
Gross Profit was 24.142 + 20.024 + 12.325 + 4.258 = $60.7 Mil.
Total Current Assets was $239.4 Mil.
Total Assets was $344.5 Mil.
Property, Plant and Equipment(Net PPE) was $26.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $31.2 Mil.
Selling, General & Admin. Expense(SGA) was $50.9 Mil.
Total Current Liabilities was $46.5 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -0.277 + -4.326 + -12.711 + -18.789 = $-36.1 Mil.
Non Operating Income was 0.228 + -0.156 + -0.066 + 0.082 = $0.1 Mil.
Cash Flow from Operations was 5.936 + 6.355 + -6.876 + -3.248 = $2.2 Mil.
|Accounts Receivable was $46.3 Mil.
Revenue was 67.634 + 62.733 + 52.62 + 47.654 = $230.6 Mil.
Gross Profit was 12.546 + 16.405 + 9.075 + -3.144 = $34.9 Mil.
Total Current Assets was $237.9 Mil.
Total Assets was $372.9 Mil.
Property, Plant and Equipment(Net PPE) was $36.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $30.8 Mil.
Selling, General & Admin. Expense(SGA) was $56.0 Mil.
Total Current Liabilities was $51.9 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)|
|=||(47.776 / 245.79)||/||(46.32 / 230.641)|
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)|
|=||(20.024 / 230.641)||/||(24.142 / 245.79)|
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 - (239.394 + 26.61) / 344.531)||/||(1 - (237.869 + 36.945) / 372.94)|
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))|
|=||(30.759 / (30.759 + 36.945))||/||(31.21 / (31.21 + 26.61))|
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)|
|=||(50.914 / 245.79)||/||(56.015 / 230.641)|
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)|
|=||((0 + 46.46) / 344.531)||/||((0 + 51.894) / 372.94)|
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|
|=||(-36.103 - 0.088||-||2.167)||/||344.531|
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 -3.21 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
FormFactor Inc Annual Data
FormFactor Inc Quarterly Data