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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.
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.
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|
|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
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)|
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)|
|=||(12862 / 97883)||/||(9452 / 90464)|
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 - (46316 + 10509) / 112037)||/||(1 - (47959 + 13683) / 122646)|
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))|
|=||(4666 / (4666 + 13683))||/||(4319 / (4319 + 10509))|
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)|
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)|
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|
|=||(11966 - 2575||-||17152)||/||112037|
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.
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