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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 Google Inc was -0.06. The lowest was -2.89. And the median was -2.58.
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 Google 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 * 0.8886||+||0.528 * 0.9887||+||0.404 * 1.0446||+||0.892 * 1.1888||+||0.115 * 1.1158|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0706||+||4.679 * -0.0614||-||0.327 * 0.9339|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $9,383 Mil.|
Revenue was 18103 + 16523 + 15955 + 15420 = $66,001 Mil.
Gross Profit was 11182 + 9828 + 9841 + 9459 = $40,310 Mil.
Total Current Assets was $80,685 Mil.
Total Assets was $131,133 Mil.
Property, Plant and Equipment(Net PPE) was $23,883 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,979 Mil.
Selling, General & Admin. Expense(SGA) was $13,982 Mil.
Total Current Liabilities was $16,805 Mil.
Long-Term Debt was $3,228 Mil.
Net Income was 4757 + 2813 + 3422 + 3452 = $14,444 Mil.
Non Operating Income was -69 + -29 + 3 + 213 = $118 Mil.
Cash Flow from Operations was 6364 + 5994 + 5627 + 4391 = $22,376 Mil.
|Accounts Receivable was $8,882 Mil.
Revenue was 15707 + 13754 + 13107 + 12951 = $55,519 Mil.
Gross Profit was 9454 + 8345 + 7912 + 7815 = $33,526 Mil.
Total Current Assets was $72,886 Mil.
Total Assets was $110,920 Mil.
Property, Plant and Equipment(Net PPE) was $16,524 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,939 Mil.
Selling, General & Admin. Expense(SGA) was $10,986 Mil.
Total Current Liabilities was $15,908 Mil.
Long-Term Debt was $2,236 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)|
|=||(9383 / 66001)||/||(8882 / 55519)|
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)|
|=||(9828 / 55519)||/||(11182 / 66001)|
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 - (80685 + 23883) / 131133)||/||(1 - (72886 + 16524) / 110920)|
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))|
|=||(3939 / (3939 + 16524))||/||(4979 / (4979 + 23883))|
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)|
|=||(13982 / 66001)||/||(10986 / 55519)|
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)|
|=||((3228 + 16805) / 131133)||/||((2236 + 15908) / 110920)|
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|
|=||(14444 - 118||-||22376)||/||131133|
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.
Google Inc has a M-score of -2.67 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
Google Inc Annual Data
Google Inc Quarterly Data