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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 -2.91. And the median was -2.59.
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 * 0.9259||+||0.528 * 0.9567||+||0.404 * 0.9742||+||0.892 * 1.0907||+||0.115 * 1.0528|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0153||+||4.679 * -0.0332||-||0.327 * 1.1866|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $570 Mil.|
Revenue was 803.306 + 706.283 + 777.848 + 583.221 = $2,871 Mil.
Gross Profit was 430.848 + 398.246 + 444.485 + 330.834 = $1,604 Mil.
Total Current Assets was $2,511 Mil.
Total Assets was $4,693 Mil.
Property, Plant and Equipment(Net PPE) was $431 Mil.
Depreciation, Depletion and Amortization(DDA) was $77 Mil.
Selling, General & Admin. Expense(SGA) was $519 Mil.
Total Current Liabilities was $1,033 Mil.
Long-Term Debt was $0 Mil.
Net Income was 210.245 + -146.834 + 181.983 + 118.818 = $364 Mil.
Non Operating Income was 17.094 + -12.186 + -19.704 + 12.33 = $-2 Mil.
Cash Flow from Operations was 145.017 + 142.342 + 164.179 + 71.173 = $523 Mil.
|Accounts Receivable was $565 Mil.
Revenue was 759.695 + 643.637 + 696.563 + 531.957 = $2,632 Mil.
Gross Profit was 394.638 + 352.889 + 383.64 + 276.133 = $1,407 Mil.
Total Current Assets was $2,596 Mil.
Total Assets was $4,880 Mil.
Property, Plant and Equipment(Net PPE) was $415 Mil.
Depreciation, Depletion and Amortization(DDA) was $79 Mil.
Selling, General & Admin. Expense(SGA) was $468 Mil.
Total Current Liabilities was $905 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)|
|=||(570.191 / 2870.658)||/||(564.586 / 2631.852)|
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)|
|=||(398.246 / 2631.852)||/||(430.848 / 2870.658)|
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 - (2510.976 + 430.887) / 4693.303)||/||(1 - (2595.636 + 414.848) / 4879.603)|
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))|
|=||(78.804 / (78.804 + 414.848))||/||(77.015 / (77.015 + 430.887))|
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)|
|=||(518.666 / 2870.658)||/||(468.346 / 2631.852)|
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 + 1033.261) / 4693.303)||/||((0 + 905.304) / 4879.603)|
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|
|=||(364.212 - -2.466||-||522.711)||/||4693.303|
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 -2.71 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