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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 -2.98. And the median was -2.63.
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 * 0.9866||+||0.528 * 0.9859||+||0.404 * 0.9997||+||0.892 * 1.1442||+||0.115 * 1.0885|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0311||+||4.679 * -0.0767||-||0.327 * 0.8441|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $9,394 Mil.|
Revenue was 17727 + 17258 + 18103 + 16523 = $69,611 Mil.
Gross Profit was 11144 + 10902 + 11182 + 9828 = $43,056 Mil.
Total Current Assets was $84,164 Mil.
Total Assets was $138,807 Mil.
Property, Plant and Equipment(Net PPE) was $27,008 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,225 Mil.
Selling, General & Admin. Expense(SGA) was $14,651 Mil.
Total Current Liabilities was $17,362 Mil.
Long-Term Debt was $2,225 Mil.
Net Income was 3931 + 3586 + 4757 + 2813 = $15,087 Mil.
Non Operating Income was -83 + -43 + -69 + -29 = $-224 Mil.
Cash Flow from Operations was 6985 + 6617 + 6364 + 5994 = $25,960 Mil.
|Accounts Receivable was $8,321 Mil.
Revenue was 15955 + 15420 + 15707 + 13754 = $60,836 Mil.
Gross Profit was 9841 + 9459 + 9454 + 8345 = $37,099 Mil.
Total Current Assets was $77,905 Mil.
Total Assets was $121,608 Mil.
Property, Plant and Equipment(Net PPE) was $19,486 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,175 Mil.
Selling, General & Admin. Expense(SGA) was $12,418 Mil.
Total Current Liabilities was $17,097 Mil.
Long-Term Debt was $3,232 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)|
|=||(9394 / 69611)||/||(8321 / 60836)|
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)|
|=||(10902 / 60836)||/||(11144 / 69611)|
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 - (84164 + 27008) / 138807)||/||(1 - (77905 + 19486) / 121608)|
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))|
|=||(4175 / (4175 + 19486))||/||(5225 / (5225 + 27008))|
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)|
|=||(14651 / 69611)||/||(12418 / 60836)|
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)|
|=||((2225 + 17362) / 138807)||/||((3232 + 17097) / 121608)|
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|
|=||(15087 - -224||-||25960)||/||138807|
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