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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 International Business Machines Corp was -2.42. The lowest was -3.11. And the median was -2.76.
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 International Business Machines Corp 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 * 0.9216||+||0.528 * 0.9898||+||0.404 * 1.0086||+||0.892 * 0.9425||+||0.115 * 0.8592|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0363||+||4.679 * -0.0632||-||0.327 * 1.0984|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $9,090 Mil.|
Revenue was 24113 + 22397 + 24364 + 22484 = $93,358 Mil.
Gross Profit was 12862 + 10874 + 11975 + 10543 = $46,254 Mil.
Total Current Assets was $49,422 Mil.
Total Assets was $117,532 Mil.
Property, Plant and Equipment(Net PPE) was $10,771 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,492 Mil.
Selling, General & Admin. Expense(SGA) was $23,044 Mil.
Total Current Liabilities was $39,600 Mil.
Long-Term Debt was $35,073 Mil.
Net Income was 5483 + 18 + 4137 + 2384 = $12,022 Mil.
Non Operating Income was 1679 + 228 + 370 + 310 = $2,587 Mil.
Cash Flow from Operations was 6059 + 3904 + 3579 + 3326 = $16,868 Mil.
|Accounts Receivable was $10,465 Mil.
Revenue was 27385 + 23338 + 24924 + 23408 = $99,055 Mil.
Gross Profit was 14337 + 11429 + 12132 + 10678 = $48,576 Mil.
Total Current Assets was $51,350 Mil.
Total Assets was $126,223 Mil.
Property, Plant and Equipment(Net PPE) was $13,821 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,678 Mil.
Selling, General & Admin. Expense(SGA) was $23,594 Mil.
Total Current Liabilities was $40,154 Mil.
Long-Term Debt was $32,856 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)|
|=||(9090 / 93358)||/||(10465 / 99055)|
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)|
|=||(10874 / 99055)||/||(12862 / 93358)|
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 - (49422 + 10771) / 117532)||/||(1 - (51350 + 13821) / 126223)|
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))|
|=||(4678 / (4678 + 13821))||/||(4492 / (4492 + 10771))|
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)|
|=||(23044 / 93358)||/||(23594 / 99055)|
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)|
|=||((35073 + 39600) / 117532)||/||((32856 + 40154) / 126223)|
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|
|=||(12022 - 2587||-||16868)||/||117532|
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.
International Business Machines Corp has a M-score of -2.96 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
International Business Machines Corp Annual Data
International Business Machines Corp Quarterly Data