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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.
Google Inc has a M-score of -2.76 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Google Inc was -0.06. The lowest was -2.90. 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 * 0.8319||+||0.528 * 1.0059||+||0.404 * 0.8971||+||0.892 * 1.1676||+||0.115 * 1.1415|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0328||+||4.679 * -0.0537||-||0.327 * 0.9965|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $8,421 Mil.|
Revenue was 15420 + 16858 + 14893 + 14105 = $61,276 Mil.
Gross Profit was 9459 + 9420 + 8480 + 8042 = $35,401 Mil.
Total Current Assets was $75,314 Mil.
Total Assets was $116,526 Mil.
Property, Plant and Equipment(Net PPE) was $17,877 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,126 Mil.
Selling, General & Admin. Expense(SGA) was $12,556 Mil.
Total Current Liabilities was $16,270 Mil.
Long-Term Debt was $3,234 Mil.
Net Income was 3452 + 3376 + 2970 + 3228 = $13,026 Mil.
Non Operating Income was 0 + -69 + -155 + 89 = $-135 Mil.
Cash Flow from Operations was 4391 + 5238 + 5083 + 4705 = $19,417 Mil.
|Accounts Receivable was $8,670 Mil.
Revenue was 12951 + 14419 + 13304 + 11807 = $52,481 Mil.
Gross Profit was 7815 + 8206 + 7349 + 7130 = $30,500 Mil.
Total Current Assets was $62,808 Mil.
Total Assets was $96,692 Mil.
Property, Plant and Equipment(Net PPE) was $12,300 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,350 Mil.
Selling, General & Admin. Expense(SGA) was $10,412 Mil.
Total Current Liabilities was $13,252 Mil.
Long-Term Debt was $2,989 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)|
|=||(8421 / 61276)||/||(8670 / 52481)|
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)|
|=||(9420 / 52481)||/||(9459 / 61276)|
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 - (75314 + 17877) / 116526)||/||(1 - (62808 + 12300) / 96692)|
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))|
|=||(3350 / (3350 + 12300))||/||(4126 / (4126 + 17877))|
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)|
|=||(12556 / 61276)||/||(10412 / 52481)|
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)|
|=||((3234 + 16270) / 116526)||/||((2989 + 13252) / 96692)|
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|
|=||(13026 - -135||-||19417)||/||116526|
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 -2.76 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