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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 -3.55. 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 * 0.9797||+||0.528 * 1.0394||+||0.404 * 1.0608||+||0.892 * 0.9572||+||0.115 * 0.9706|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0429||+||4.679 * -0.0564||-||0.327 * 0.9991|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $873 Mil.|
Revenue was 19226 + 20238 + 18684 + 22059 = $80,207 Mil.
Gross Profit was 9013 + 9702 + 8686 + 11406 = $38,807 Mil.
Total Current Assets was $41,433 Mil.
Total Assets was $115,606 Mil.
Property, Plant and Equipment(Net PPE) was $11,104 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,244 Mil.
Selling, General & Admin. Expense(SGA) was $20,661 Mil.
Total Current Liabilities was $34,447 Mil.
Long-Term Debt was $35,563 Mil.
Net Income was 2853 + 2504 + 2014 + 4463 = $11,834 Mil.
Non Operating Income was -13 + -66 + -276 + 127 = $-228 Mil.
Cash Flow from Operations was 4213 + 3443 + 5645 + 5279 = $18,580 Mil.
|Accounts Receivable was $931 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.
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)|
|=||(873 / 80207)||/||(931 / 83796)|
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)|
|=||(42140 / 83796)||/||(38807 / 80207)|
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 - (41433 + 11104) / 115606)||/||(1 - (42112 + 10661) / 108649)|
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))|
|=||(3911 / (3911 + 10661))||/||(4244 / (4244 + 11104))|
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)|
|=||(20661 / 80207)||/||(20698 / 83796)|
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)|
|=||((35563 + 34447) / 115606)||/||((32122 + 33732) / 108649)|
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|
|=||(11834 - -228||-||18580)||/||115606|
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 -2.77 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