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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 -3.10. And the median was -2.70.
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 * 0.9574||+||0.528 * 0.9897||+||0.404 * 1.5794||+||0.892 * 1.1365||+||0.115 * 0.7258|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0446||+||4.679 * -0.0954||-||0.327 * 1.1787|
|This Year (Jan17) TTM:||Last Year (Jan16) TTM:|
|Accounts Receivable was $64.6 Mil.|
Revenue was 115.621 + 94.127 + 141.177 + 98.86 = $449.8 Mil.
Gross Profit was 74.81 + 52.108 + 98.421 + 59.853 = $285.2 Mil.
Total Current Assets was $671.3 Mil.
Total Assets was $951.9 Mil.
Property, Plant and Equipment(Net PPE) was $11.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $11.7 Mil.
Selling, General & Admin. Expense(SGA) was $155.4 Mil.
Total Current Liabilities was $128.6 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 3.974 + -7.858 + 16.097 + -0.404 = $11.8 Mil.
Non Operating Income was 0.335 + -0.681 + -0.344 + 0.804 = $0.1 Mil.
Cash Flow from Operations was 42.559 + -12.91 + 49.259 + 23.611 = $102.5 Mil.
|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.
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)|
|=||(64.626 / 449.785)||/||(59.392 / 395.766)|
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)|
|=||(248.362 / 395.766)||/||(285.192 / 449.785)|
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 - (671.299 + 11.738) / 951.914)||/||(1 - (663.822 + 13.04) / 824.277)|
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))|
|=||(7.401 / (7.401 + 13.04))||/||(11.683 / (11.683 + 11.738))|
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)|
|=||(155.401 / 449.785)||/||(130.898 / 395.766)|
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 + 128.575) / 951.914)||/||((0 + 94.456) / 824.277)|
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|
|=||(11.809 - 0.114||-||102.519)||/||951.914|
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 -2.71 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
Guidewire Software Inc Annual Data
Guidewire Software Inc Quarterly Data