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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 -2.74.
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 * 0.9653||+||0.528 * 0.9911||+||0.404 * 1.0078||+||0.892 * 0.8723||+||0.115 * 1.1039|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0228||+||4.679 * -0.0577||-||0.327 * 0.9594|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $8,918 Mil.|
Revenue was 19280 + 20813 + 19590 + 24113 = $83,796 Mil.
Gross Profit was 9436 + 10390 + 9452 + 12862 = $42,140 Mil.
Total Current Assets was $42,112 Mil.
Total Assets was $108,649 Mil.
Property, Plant and Equipment(Net PPE) was $10,661 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,911 Mil.
Selling, General & Admin. Expense(SGA) was $20,698 Mil.
Total Current Liabilities was $33,732 Mil.
Long-Term Debt was $32,122 Mil.
Net Income was 2950 + 3449 + 2328 + 5483 = $14,210 Mil.
Non Operating Income was 304 + 411 + 298 + 1679 = $2,692 Mil.
Cash Flow from Operations was 4235 + 3884 + 3610 + 6059 = $17,788 Mil.
|Accounts Receivable was $10,591 Mil.
Revenue was 22397 + 24047 + 22236 + 27385 = $96,065 Mil.
Gross Profit was 10874 + 12044 + 10627 + 14337 = $47,882 Mil.
Total Current Assets was $47,164 Mil.
Total Assets was $118,911 Mil.
Property, Plant and Equipment(Net PPE) was $11,068 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,660 Mil.
Selling, General & Admin. Expense(SGA) was $23,199 Mil.
Total Current Liabilities was $42,306 Mil.
Long-Term Debt was $32,821 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)|
|=||(8918 / 83796)||/||(10591 / 96065)|
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)|
|=||(10390 / 96065)||/||(9436 / 83796)|
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 - (42112 + 10661) / 108649)||/||(1 - (47164 + 11068) / 118911)|
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))|
|=||(4660 / (4660 + 11068))||/||(3911 / (3911 + 10661))|
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)|
|=||(20698 / 83796)||/||(23199 / 96065)|
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)|
|=||((32122 + 33732) / 108649)||/||((32821 + 42306) / 118911)|
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|
|=||(14210 - 2692||-||17788)||/||108649|
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 -2.88 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