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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 -2.44.
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 * 0.8657||+||0.528 * 0.6526||+||0.404 * 0.7807||+||0.892 * 1.2106||+||0.115 * 0.9883|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8039||+||4.679 * -0.1215||-||0.327 * 1.0499|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|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.
Net Income was 0.838 + 0.783 + -1.871 + -0.277 = $-0.5 Mil.
Non Operating Income was 0.1 + 1.501 + 0.155 + 0.228 = $2.0 Mil.
Cash Flow from Operations was 14.281 + 7.389 + 12.244 + 5.936 = $39.9 Mil.
|Accounts Receivable was $42.0 Mil.
Revenue was 67.352 + 55.959 + 48.546 + 67.634 = $239.5 Mil.
Gross Profit was 20.024 + 12.325 + 4.258 + 12.546 = $49.2 Mil.
Total Current Assets was $224.2 Mil.
Total Assets was $337.1 Mil.
Property, Plant and Equipment(Net PPE) was $29.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $30.5 Mil.
Selling, General & Admin. Expense(SGA) was $50.6 Mil.
Total Current Liabilities was $43.3 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)|
|=||(43.979 / 289.932)||/||(41.962 / 239.491)|
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)|
|=||(22.789 / 239.491)||/||(23.303 / 289.932)|
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 - (256.614 + 24.485) / 348.753)||/||(1 - (224.152 + 29.21) / 337.128)|
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))|
|=||(30.522 / (30.522 + 29.21))||/||(26.214 / (26.214 + 24.485))|
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)|
|=||(49.203 / 289.932)||/||(50.557 / 239.491)|
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 + 47.055) / 348.753)||/||((0 + 43.324) / 337.128)|
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|
|=||(-0.527 - 1.984||-||39.85)||/||348.753|
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 -3.24 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