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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 -2.15. The lowest was -2.86. And the median was -2.51.
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 * 0.9981||+||0.528 * 0.9947||+||0.404 * 0.9923||+||0.892 * 1.0446||+||0.115 * 1.1058|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.029||+||4.679 * -0.0281||-||0.327 * 1.0391|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $615 Mil.|
Revenue was 681.747 + 648.783 + 630.523 + 609.703 = $2,571 Mil.
Gross Profit was 276.075 + 256.351 + 246.768 + 236.855 = $1,016 Mil.
Total Current Assets was $1,227 Mil.
Total Assets was $2,886 Mil.
Property, Plant and Equipment(Net PPE) was $200 Mil.
Depreciation, Depletion and Amortization(DDA) was $82 Mil.
Selling, General & Admin. Expense(SGA) was $644 Mil.
Total Current Liabilities was $731 Mil.
Long-Term Debt was $701 Mil.
Net Income was 77.109 + 68.779 + 65.231 + 58.565 = $270 Mil.
Non Operating Income was 1.06 + 3.02 + 3.237 + -2.265 = $5 Mil.
Cash Flow from Operations was 122.852 + 143.732 + 90.974 + -11.786 = $346 Mil.
|Accounts Receivable was $590 Mil.
Revenue was 646.528 + 617.831 + 609.532 + 587.153 = $2,461 Mil.
Gross Profit was 252.591 + 242.001 + 243.228 + 229.677 = $967 Mil.
Total Current Assets was $1,195 Mil.
Total Assets was $2,793 Mil.
Property, Plant and Equipment(Net PPE) was $175 Mil.
Depreciation, Depletion and Amortization(DDA) was $83 Mil.
Selling, General & Admin. Expense(SGA) was $599 Mil.
Total Current Liabilities was $594 Mil.
Long-Term Debt was $740 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)|
|=||(615.265 / 2570.756)||/||(590.137 / 2461.044)|
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)|
|=||(967.497 / 2461.044)||/||(1016.049 / 2570.756)|
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 - (1227.037 + 200.115) / 2885.88)||/||(1 - (1195.069 + 175.396) / 2793.489)|
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))|
|=||(82.799 / (82.799 + 175.396))||/||(81.736 / (81.736 + 200.115))|
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)|
|=||(644.016 / 2570.756)||/||(599.13 / 2461.044)|
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)|
|=||((700.652 + 731.355) / 2885.88)||/||((739.536 + 594.48) / 2793.489)|
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|
|=||(269.684 - 5.052||-||345.772)||/||2885.88|
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 -2.58 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