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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 -2.58.
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 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 * 0.9265||+||0.528 * 0.9806||+||0.404 * 0.9603||+||0.892 * 1.0703||+||0.115 * 0.985|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9769||+||4.679 * -0.037||-||0.327 * 0.8987|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $527 Mil.|
Revenue was 860.767 + 722.25 + 811.609 + 624.04 = $3,019 Mil.
Gross Profit was 470.782 + 405.98 + 462.958 + 339.85 = $1,680 Mil.
Total Current Assets was $2,263 Mil.
Total Assets was $4,525 Mil.
Property, Plant and Equipment(Net PPE) was $483 Mil.
Depreciation, Depletion and Amortization(DDA) was $86 Mil.
Selling, General & Admin. Expense(SGA) was $588 Mil.
Total Current Liabilities was $783 Mil.
Long-Term Debt was $0 Mil.
Net Income was 136.605 + 125.054 + 161.064 + 88.092 = $511 Mil.
Non Operating Income was -0.556 + -18.077 + -5.328 + -3.684 = $-28 Mil.
Cash Flow from Operations was 213.316 + 212.994 + 149.985 + 129.387 = $706 Mil.
|Accounts Receivable was $531 Mil.
Revenue was 781.357 + 679.69 + 773.83 + 585.394 = $2,820 Mil.
Gross Profit was 413.143 + 362.19 + 419.25 + 344.122 = $1,539 Mil.
Total Current Assets was $2,211 Mil.
Total Assets was $4,499 Mil.
Property, Plant and Equipment(Net PPE) was $446 Mil.
Depreciation, Depletion and Amortization(DDA) was $78 Mil.
Selling, General & Admin. Expense(SGA) was $562 Mil.
Total Current Liabilities was $866 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)|
|=||(527.062 / 3018.666)||/||(531.481 / 2820.271)|
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)|
|=||(1538.705 / 2820.271)||/||(1679.57 / 3018.666)|
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 - (2263.016 + 482.878) / 4525.133)||/||(1 - (2211.087 + 446.089) / 4499.391)|
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))|
|=||(78.36 / (78.36 + 446.089))||/||(86.34 / (86.34 + 482.878))|
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)|
|=||(587.701 / 3018.666)||/||(562.081 / 2820.271)|
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 + 782.735) / 4525.133)||/||((0 + 865.998) / 4499.391)|
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|
|=||(510.815 - -27.645||-||705.682)||/||4525.133|
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 -2.65 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