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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 16.29. The lowest was -3.64. And the median was -2.75.
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 * 1.0357||+||0.528 * 0.9959||+||0.404 * 1.0048||+||0.892 * 0.896||+||0.115 * 0.9169|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0453||+||4.679 * -0.078||-||0.327 * 0.9936|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $27,910 Mil.|
Revenue was 20813 + 19590 + 24113 + 22397 = $86,913 Mil.
Gross Profit was 10390 + 9452 + 12862 + 10874 = $43,578 Mil.
Total Current Assets was $45,186 Mil.
Total Assets was $112,729 Mil.
Property, Plant and Equipment(Net PPE) was $10,702 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,114 Mil.
Selling, General & Admin. Expense(SGA) was $21,547 Mil.
Total Current Liabilities was $35,535 Mil.
Long-Term Debt was $33,339 Mil.
Net Income was 3449 + 2328 + 5483 + 18 = $11,278 Mil.
Non Operating Income was 411 + 298 + 1679 + 228 = $2,616 Mil.
Cash Flow from Operations was 3884 + 3610 + 6059 + 3904 = $17,457 Mil.
|Accounts Receivable was $30,077 Mil.
Revenue was 24047 + 22236 + 27385 + 23338 = $97,006 Mil.
Gross Profit was 12044 + 10627 + 14337 + 11429 = $48,437 Mil.
Total Current Assets was $48,182 Mil.
Total Assets was $124,314 Mil.
Property, Plant and Equipment(Net PPE) was $13,748 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,696 Mil.
Selling, General & Admin. Expense(SGA) was $23,006 Mil.
Total Current Liabilities was $42,433 Mil.
Long-Term Debt was $34,008 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)|
|=||(27910 / 86913)||/||(30077 / 97006)|
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)|
|=||(9452 / 97006)||/||(10390 / 86913)|
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 - (45186 + 10702) / 112729)||/||(1 - (48182 + 13748) / 124314)|
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))|
|=||(4696 / (4696 + 13748))||/||(4114 / (4114 + 10702))|
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)|
|=||(21547 / 86913)||/||(23006 / 97006)|
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)|
|=||((33339 + 35535) / 112729)||/||((34008 + 42433) / 124314)|
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|
|=||(11278 - 2616||-||17457)||/||112729|
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 -2.92 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