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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 8 years, the highest Beneish M-Score of Guidewire Software Inc was 0.47. The lowest was -3.01. And the median was -2.17.
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 * 0.9071||+||0.528 * 0.9548||+||0.404 * 1.3536||+||0.892 * 1.1154||+||0.115 * 0.9389|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0437||+||4.679 * -0.0921||-||0.327 * 0.9958|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jul16) TTM:||Last Year (Jul15) TTM:|
|Accounts Receivable was $62.8 Mil.|
Revenue was 141.177 + 98.86 + 102.129 + 82.28 = $424.4 Mil.
Gross Profit was 98.421 + 59.853 + 67.228 + 47.11 = $272.6 Mil.
Total Current Assets was $707.7 Mil.
Total Assets was $916.2 Mil.
Property, Plant and Equipment(Net PPE) was $13.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $8.8 Mil.
Selling, General & Admin. Expense(SGA) was $143.7 Mil.
Total Current Liabilities was $119.1 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 16.097 + -0.404 + 0.913 + -1.63 = $15.0 Mil.
Non Operating Income was -0.344 + 0.804 + -1.182 + 0.217 = $-0.5 Mil.
Cash Flow from Operations was 49.259 + 23.611 + 37.92 + -10.89 = $99.9 Mil.
|Accounts Receivable was $62.1 Mil.
Revenue was 125.917 + 85.44 + 89.446 + 79.734 = $380.5 Mil.
Gross Profit was 86.488 + 47.536 + 55.366 + 43.963 = $233.4 Mil.
Total Current Assets was $661.6 Mil.
Total Assets was $799.9 Mil.
Property, Plant and Equipment(Net PPE) was $12.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.5 Mil.
Selling, General & Admin. Expense(SGA) was $123.4 Mil.
Total Current Liabilities was $104.4 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)|
|=||(62.792 / 424.446)||/||(62.062 / 380.537)|
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)|
|=||(233.353 / 380.537)||/||(272.612 / 424.446)|
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 - (707.672 + 12.955) / 916.178)||/||(1 - (661.644 + 12.16) / 799.947)|
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))|
|=||(7.48 / (7.48 + 12.16))||/||(8.842 / (8.842 + 12.955))|
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)|
|=||(143.679 / 424.446)||/||(123.42 / 380.537)|
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 + 119.083) / 916.178)||/||((0 + 104.409) / 799.947)|
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|
|=||(14.976 - -0.505||-||99.9)||/||916.178|
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 -2.79 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