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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 -1.65. The lowest was -3.39. 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 * 0.974||+||0.528 * 1.0161||+||0.404 * 1.0299||+||0.892 * 0.8967||+||0.115 * 1.1038|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0606||+||4.679 * -0.0552||-||0.327 * 1.0098|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $10,084 Mil.|
Revenue was 18684 + 22059 + 19280 + 20813 = $80,836 Mil.
Gross Profit was 8686 + 11406 + 9436 + 10390 = $39,918 Mil.
Total Current Assets was $47,623 Mil.
Total Assets was $118,856 Mil.
Property, Plant and Equipment(Net PPE) was $10,910 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,911 Mil.
Selling, General & Admin. Expense(SGA) was $21,245 Mil.
Total Current Liabilities was $34,664 Mil.
Long-Term Debt was $40,254 Mil.
Net Income was 2014 + 4463 + 2950 + 3449 = $12,876 Mil.
Non Operating Income was -35 + -290 + 304 + 411 = $390 Mil.
Cash Flow from Operations was 5645 + 5279 + 4235 + 3884 = $19,043 Mil.
|Accounts Receivable was $11,546 Mil.
Revenue was 19590 + 24113 + 22397 + 24047 = $90,147 Mil.
Gross Profit was 9452 + 12862 + 10874 + 12044 = $45,232 Mil.
Total Current Assets was $46,316 Mil.
Total Assets was $112,037 Mil.
Property, Plant and Equipment(Net PPE) was $10,509 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,319 Mil.
Selling, General & Admin. Expense(SGA) was $22,338 Mil.
Total Current Liabilities was $35,640 Mil.
Long-Term Debt was $34,295 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)|
|=||(10084 / 80836)||/||(11546 / 90147)|
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)|
|=||(45232 / 90147)||/||(39918 / 80836)|
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 - (47623 + 10910) / 118856)||/||(1 - (46316 + 10509) / 112037)|
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))|
|=||(4319 / (4319 + 10509))||/||(3911 / (3911 + 10910))|
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)|
|=||(21245 / 80836)||/||(22338 / 90147)|
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)|
|=||((40254 + 34664) / 118856)||/||((34295 + 35640) / 112037)|
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|
|=||(12876 - 390||-||19043)||/||118856|
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 -2.84 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