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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 7 years, the highest Beneish M-Score of Guidewire Software Inc was 0.47. The lowest was -3.10. And the median was -2.50.
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 Guidewire Software 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 * 0.8971||+||0.528 * 0.969||+||0.404 * 1.2388||+||0.892 * 1.0713||+||0.115 * 1.0128|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0656||+||4.679 * -0.0932||-||0.327 * 1.02|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $59.4 Mil.|
Revenue was 102.129 + 82.28 + 125.917 + 85.44 = $395.8 Mil.
Gross Profit was 67.228 + 47.11 + 86.488 + 47.536 = $248.4 Mil.
Total Current Assets was $663.8 Mil.
Total Assets was $824.3 Mil.
Property, Plant and Equipment(Net PPE) was $13.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.4 Mil.
Selling, General & Admin. Expense(SGA) was $130.9 Mil.
Total Current Liabilities was $94.5 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 0.913 + -1.63 + 11.893 + -2.987 = $8.2 Mil.
Non Operating Income was -1.182 + 0.217 + -0.731 + 0.077 = $-1.6 Mil.
Cash Flow from Operations was 37.92 + -10.89 + 33.013 + 26.597 = $86.6 Mil.
|Accounts Receivable was $61.8 Mil.
Revenue was 89.446 + 79.734 + 118.207 + 82.035 = $369.4 Mil.
Gross Profit was 55.366 + 43.963 + 79.559 + 45.76 = $224.6 Mil.
Total Current Assets was $628.5 Mil.
Total Assets was $749.0 Mil.
Property, Plant and Equipment(Net PPE) was $12.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.2 Mil.
Selling, General & Admin. Expense(SGA) was $114.7 Mil.
Total Current Liabilities was $84.1 Mil.
Long-Term Debt was $0.0 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)|
|=||(59.392 / 395.766)||/||(61.797 / 369.422)|
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)|
|=||(47.11 / 369.422)||/||(67.228 / 395.766)|
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 - (663.822 + 13.04) / 824.277)||/||(1 - (628.517 + 12.372) / 749.02)|
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))|
|=||(7.164 / (7.164 + 12.372))||/||(7.401 / (7.401 + 13.04))|
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)|
|=||(130.898 / 395.766)||/||(114.665 / 369.422)|
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 + 94.456) / 824.277)||/||((0 + 84.149) / 749.02)|
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|
|=||(8.189 - -1.619||-||86.64)||/||824.277|
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.
Guidewire Software Inc has a M-score of -2.88 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
Guidewire Software Inc Annual Data
Guidewire Software Inc Quarterly Data