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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 Garmin Ltd was -1.19. The lowest was -3.31. And the median was -2.37.
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 Garmin 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 * 1.0067||+||0.528 * 1.0189||+||0.404 * 1.075||+||0.892 * 1.0097||+||0.115 * 0.9668|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0289||+||4.679 * -0.0216||-||0.327 * 1.0265|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $510 Mil.|
Revenue was 811.609 + 624.04 + 781.357 + 679.69 = $2,897 Mil.
Gross Profit was 462.958 + 339.85 + 413.143 + 362.19 = $1,578 Mil.
Total Current Assets was $2,213 Mil.
Total Assets was $4,528 Mil.
Property, Plant and Equipment(Net PPE) was $451 Mil.
Depreciation, Depletion and Amortization(DDA) was $82 Mil.
Selling, General & Admin. Expense(SGA) was $568 Mil.
Total Current Liabilities was $1,010 Mil.
Long-Term Debt was $0 Mil.
Net Income was 161.064 + 88.092 + 132.383 + 119.299 = $501 Mil.
Non Operating Income was -5.328 + -3.684 + -0.577 + 32.583 = $23 Mil.
Cash Flow from Operations was 149.985 + 129.387 + 158.336 + 137.835 = $576 Mil.
|Accounts Receivable was $502 Mil.
Revenue was 773.83 + 585.394 + 803.306 + 706.283 = $2,869 Mil.
Gross Profit was 419.25 + 344.122 + 430.848 + 398.246 = $1,592 Mil.
Total Current Assets was $2,283 Mil.
Total Assets was $4,423 Mil.
Property, Plant and Equipment(Net PPE) was $446 Mil.
Depreciation, Depletion and Amortization(DDA) was $78 Mil.
Selling, General & Admin. Expense(SGA) was $547 Mil.
Total Current Liabilities was $962 Mil.
Long-Term Debt was $0 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)|
|=||(510.309 / 2896.696)||/||(502.034 / 2868.813)|
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)|
|=||(1592.466 / 2868.813)||/||(1578.141 / 2896.696)|
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 - (2212.587 + 450.654) / 4527.583)||/||(1 - (2283.296 + 445.672) / 4423.409)|
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))|
|=||(77.687 / (77.687 + 445.672))||/||(81.739 / (81.739 + 450.654))|
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)|
|=||(568.085 / 2896.696)||/||(546.806 / 2868.813)|
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)|
|=||((0 + 1010.429) / 4527.583)||/||((0 + 961.681) / 4423.409)|
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|
|=||(500.838 - 22.994||-||575.543)||/||4527.583|
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.
Garmin Ltd has a M-score of -2.54 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
Garmin Ltd Annual Data
Garmin Ltd Quarterly Data