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International Business Machines Corp (NYSE:IBM)
Beneish M-Score
12.99 (As of Today)

Warning Sign:

Beneish M-Score 12.99 higher than -2.22, which implies that it might have manipulated its financial results.

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.

International Business Machines Corp has a M-score of 12.99 signals that the company is a manipulator.

IBM' s 10-Year Beneish M-Score Range
Min: -3.76   Max: 12.99
Current: 12.99

-3.76
12.99

During the past 13 years, the highest Beneish M-Score of International Business Machines Corp was 12.99. The lowest was -3.76. And the median was -2.76.


Definition

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 * 18.2624+0.528 * 0.993+0.404 * 0.9908+0.892 * 0.9242+0.115 * 0.873
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.984+4.679 * -0.0693-0.327 * 1.011
=12.99

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Mar15) TTM:Last Year (Mar14) TTM:
Accounts Receivable was $27,849 Mil.
Revenue was 19590 + 24113 + 22397 + 24364 = $90,464 Mil.
Gross Profit was 9452 + 12862 + 10874 + 11975 = $45,163 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 $21,955 Mil.
Total Current Liabilities was $35,640 Mil.
Long-Term Debt was $34,295 Mil.
Net Income was 2328 + 5483 + 18 + 4137 = $11,966 Mil.
Non Operating Income was 298 + 1679 + 228 + 370 = $2,575 Mil.
Cash Flow from Operations was 3610 + 6059 + 3904 + 3579 = $17,152 Mil.
Accounts Receivable was $1,650 Mil.
Revenue was 22236 + 27385 + 23338 + 24924 = $97,883 Mil.
Gross Profit was 10627 + 14337 + 11429 + 12132 = $48,525 Mil.
Total Current Assets was $47,959 Mil.
Total Assets was $122,646 Mil.
Property, Plant and Equipment(Net PPE) was $13,683 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,666 Mil.
Selling, General & Admin. Expense(SGA) was $24,142 Mil.
Total Current Liabilities was $41,059 Mil.
Long-Term Debt was $34,668 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(27849 / 90464) / (1650 / 97883)
=0.30784622 / 0.01685686
=18.2624

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(12862 / 97883) / (9452 / 90464)
=0.49574492 / 0.49923727
=0.993

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (46316 + 10509) / 112037) / (1 - (47959 + 13683) / 122646)
=0.49280149 / 0.49739902
=0.9908

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=90464 / 97883
=0.9242

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))
=(4666 / (4666 + 13683)) / (4319 / (4319 + 10509))
=0.25429179 / 0.29127327
=0.873

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)
=(21955 / 90464) / (24142 / 97883)
=0.24269323 / 0.2466414
=0.984

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)
=((34295 + 35640) / 112037) / ((34668 + 41059) / 122646)
=0.62421343 / 0.6174437
=1.011

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(11966 - 2575 - 17152) / 112037
=-0.0693

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 12.99 signals that the company is likely to be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

International Business Machines Corp Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.91471.09720.98430.92111.06440.84610.99520.97721.04230.9208
GMI 0.92150.9570.99160.95870.96360.99240.98250.97440.97250.9896
AQI 0.99890.97581.01330.9740.99821.07220.98171.05541.03371.0086
SGI 0.94641.00321.08051.0490.9241.04291.07060.97750.94120.9433
DEPI 0.89331.06751.00050.92951.05841.02120.99121.02830.99030.8592
SGAI 1.12160.94751.00771.01060.94961.00671.00661.02121.0511.0391
LVGI 0.97211.09111.07171.06330.89371.03521.01461.01781.01831.0984
TATA -0.0939-0.0643-0.0602-0.0724-0.0806-0.0579-0.0428-0.0402-0.0165-0.0633
M-score -3.11-2.73-2.73-2.91-2.84-2.84-2.65-2.71-2.59-2.96

International Business Machines Corp Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
DSRI 0.97721.06941.06250.14741.03510.14440.990.91440.924118.2624
GMI 0.97430.97550.97630.97320.98140.97410.97690.98630.98540.993
AQI 1.05541.02411.01321.03431.03371.0661.07241.06561.00860.9908
SGI 0.97750.9650.9650.96450.94780.94810.95060.95450.940.9242
DEPI 1.02830.99260.98521.00730.99031.00571.01140.84250.85920.873
SGAI 1.02131.02291.06841.01771.07411.10941.01871.05561.03170.984
LVGI 1.01781.02711.04541.0421.01831.08391.05171.09981.09841.011
TATA -0.0402-0.0383-0.0331-0.0187-0.0165-0.0174-0.0135-0.049-0.0633-0.0693
M-score -2.71-2.64-2.64-3.40-2.59-3.43-2.60-2.87-2.9612.99
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