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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 -2.47.
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 * 0.93||+||0.528 * 0.9677||+||0.404 * 0.8665||+||0.892 * 1.0707||+||0.115 * 1.0254|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0456||+||4.679 * -0.0358||-||0.327 * 1.2333|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $426 Mil.|
Revenue was 585.394 + 803.306 + 706.283 + 777.848 = $2,873 Mil.
Gross Profit was 344.122 + 430.848 + 398.246 + 444.485 = $1,618 Mil.
Total Current Assets was $2,500 Mil.
Total Assets was $4,543 Mil.
Property, Plant and Equipment(Net PPE) was $436 Mil.
Depreciation, Depletion and Amortization(DDA) was $77 Mil.
Selling, General & Admin. Expense(SGA) was $531 Mil.
Total Current Liabilities was $824 Mil.
Long-Term Debt was $0 Mil.
Net Income was 66.793 + 210.245 + -146.834 + 181.983 = $312 Mil.
Non Operating Income was -43.526 + 17.094 + -12.186 + -19.704 = $-58 Mil.
Cash Flow from Operations was 81.655 + 145.017 + 142.342 + 164.179 = $533 Mil.
|Accounts Receivable was $427 Mil.
Revenue was 583.221 + 759.695 + 643.637 + 696.563 = $2,683 Mil.
Gross Profit was 330.834 + 394.638 + 352.889 + 383.64 = $1,462 Mil.
Total Current Assets was $2,387 Mil.
Total Assets was $4,739 Mil.
Property, Plant and Equipment(Net PPE) was $417 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $474 Mil.
Total Current Liabilities was $697 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)|
|=||(425.65 / 2872.831)||/||(427.457 / 2683.116)|
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)|
|=||(430.848 / 2683.116)||/||(344.122 / 2872.831)|
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 - (2500.307 + 436.104) / 4543.279)||/||(1 - (2387.495 + 417.164) / 4738.914)|
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))|
|=||(76.326 / (76.326 + 417.164))||/||(77.467 / (77.467 + 436.104))|
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)|
|=||(530.787 / 2872.831)||/||(474.129 / 2683.116)|
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 + 824.261) / 4543.279)||/||((0 + 697.108) / 4738.914)|
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|
|=||(312.187 - -58.322||-||533.193)||/||4543.279|
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 -2.80 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