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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 Genpact Ltd was -2.14. The lowest was -3.00. And the median was -2.56.
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 Genpact Ltd 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 * 0.9528||+||0.528 * 0.9837||+||0.404 * 1.0057||+||0.892 * 1.0803||+||0.115 * 0.9025|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0182||+||4.679 * -0.0264||-||0.327 * 0.9884|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $549 Mil.|
Revenue was 617.831 + 609.532 + 587.153 + 601.53 = $2,416 Mil.
Gross Profit was 242.001 + 243.228 + 229.677 + 242.331 = $957 Mil.
Total Current Assets was $1,236 Mil.
Total Assets was $2,789 Mil.
Property, Plant and Equipment(Net PPE) was $164 Mil.
Depreciation, Depletion and Amortization(DDA) was $83 Mil.
Selling, General & Admin. Expense(SGA) was $601 Mil.
Total Current Liabilities was $586 Mil.
Long-Term Debt was $747 Mil.
Net Income was 68.05 + 62.701 + 44.653 + 45.752 = $221 Mil.
Non Operating Income was 0.221 + -14.397 + -9.31 + -28.388 = $-52 Mil.
Cash Flow from Operations was 139 + 90.292 + 24.288 + 93.035 = $347 Mil.
|Accounts Receivable was $534 Mil.
Revenue was 588.107 + 561.611 + 528.19 + 558.459 = $2,236 Mil.
Gross Profit was 233.632 + 221.486 + 203.901 + 212.617 = $872 Mil.
Total Current Assets was $1,206 Mil.
Total Assets was $2,739 Mil.
Property, Plant and Equipment(Net PPE) was $176 Mil.
Depreciation, Depletion and Amortization(DDA) was $77 Mil.
Selling, General & Admin. Expense(SGA) was $546 Mil.
Total Current Liabilities was $671 Mil.
Long-Term Debt was $653 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)|
|=||(549.438 / 2416.046)||/||(533.793 / 2236.367)|
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)|
|=||(243.228 / 2236.367)||/||(242.001 / 2416.046)|
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 - (1235.519 + 163.848) / 2789.005)||/||(1 - (1206.058 + 176.173) / 2739.384)|
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))|
|=||(76.988 / (76.988 + 176.173))||/||(83.266 / (83.266 + 163.848))|
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)|
|=||(600.845 / 2416.046)||/||(546.194 / 2236.367)|
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)|
|=||((747.118 + 585.981) / 2789.005)||/||((653.227 + 671.493) / 2739.384)|
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|
|=||(221.156 - -51.874||-||346.615)||/||2789.005|
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.
Genpact Ltd has a M-score of -2.59 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
Genpact Ltd Annual Data
Genpact Ltd Quarterly Data