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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 -2.93. And the median was -2.53.
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 * 1.0766||+||0.528 * 1.0103||+||0.404 * 0.9957||+||0.892 * 1.0621||+||0.115 * 1.0314|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9535||+||4.679 * -0.0155||-||0.327 * 1.0433|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $606 Mil.|
Revenue was 609.703 + 646.528 + 617.831 + 609.532 = $2,484 Mil.
Gross Profit was 236.855 + 252.591 + 242.001 + 243.228 = $975 Mil.
Total Current Assets was $1,234 Mil.
Total Assets was $2,844 Mil.
Property, Plant and Equipment(Net PPE) was $180 Mil.
Depreciation, Depletion and Amortization(DDA) was $81 Mil.
Selling, General & Admin. Expense(SGA) was $611 Mil.
Total Current Liabilities was $590 Mil.
Long-Term Debt was $728 Mil.
Net Income was 58.565 + 64.413 + 68.05 + 62.701 = $254 Mil.
Non Operating Income was -2.265 + 11.258 + 1.777 + -4.211 = $7 Mil.
Cash Flow from Operations was -11.786 + 73.861 + 139 + 90.292 = $291 Mil.
|Accounts Receivable was $530 Mil.
Revenue was 587.153 + 601.53 + 588.107 + 561.611 = $2,338 Mil.
Gross Profit was 229.677 + 242.331 + 233.632 + 221.486 = $927 Mil.
Total Current Assets was $1,181 Mil.
Total Assets was $2,736 Mil.
Property, Plant and Equipment(Net PPE) was $174 Mil.
Depreciation, Depletion and Amortization(DDA) was $82 Mil.
Selling, General & Admin. Expense(SGA) was $603 Mil.
Total Current Liabilities was $565 Mil.
Long-Term Debt was $651 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)|
|=||(605.598 / 2483.594)||/||(529.618 / 2338.401)|
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)|
|=||(927.126 / 2338.401)||/||(974.675 / 2483.594)|
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 - (1233.928 + 179.699) / 2843.564)||/||(1 - (1180.804 + 173.576) / 2736.269)|
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))|
|=||(82.106 / (82.106 + 173.576))||/||(81.241 / (81.241 + 179.699))|
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)|
|=||(610.708 / 2483.594)||/||(603.019 / 2338.401)|
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)|
|=||((727.538 + 590.369) / 2843.564)||/||((650.79 + 564.719) / 2736.269)|
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|
|=||(253.729 - 6.559||-||291.367)||/||2843.564|
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 -2.43 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