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

Warning Sign:

Beneish M-Score 3.93 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 3.93 signals that the company is a manipulator.

IBM' s 10-Year Beneish M-Score Range
Min: -3.47   Max: 3.93
Current: 3.93

-3.47
3.93

During the past 13 years, the highest Beneish M-Score of International Business Machines Corp was 3.93. The lowest was -3.47. And the median was -2.75.


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 * 8.1476+0.528 * 0.9726+0.404 * 1.0086+0.892 * 0.9295+0.115 * 1.0433
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.056+4.679 * -0.0124-0.327 * 1.0984
=3.93

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $11,996 Mil.
Revenue was 24113 + 22397 + 24364 + 22484 = $93,358 Mil.
Gross Profit was 12862 + 10874 + 11975 + 10543 = $46,254 Mil.
Total Current Assets was $49,422 Mil.
Total Assets was $117,532 Mil.
Property, Plant and Equipment(Net PPE) was $10,771 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,446 Mil.
Selling, General & Admin. Expense(SGA) was $23,207 Mil.
Total Current Liabilities was $39,600 Mil.
Long-Term Debt was $35,073 Mil.
Net Income was 5484 + 18 + 4137 + 2384 = $12,023 Mil.
Non Operating Income was 1703 + 248 + 392 + 332 = $2,675 Mil.
Cash Flow from Operations was 0 + 3904 + 3579 + 3326 = $10,809 Mil.
Accounts Receivable was $1,584 Mil.
Revenue was 28769 + 23338 + 24924 + 23408 = $100,439 Mil.
Gross Profit was 14158 + 11429 + 12132 + 10678 = $48,397 Mil.
Total Current Assets was $51,350 Mil.
Total Assets was $126,223 Mil.
Property, Plant and Equipment(Net PPE) was $13,821 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,678 Mil.
Selling, General & Admin. Expense(SGA) was $23,644 Mil.
Total Current Liabilities was $40,154 Mil.
Long-Term Debt was $32,856 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)
=(11996 / 93358) / (1584 / 100439)
=0.12849461 / 0.01577077
=8.1476

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)
=(10874 / 100439) / (12862 / 93358)
=0.48185466 / 0.49544763
=0.9726

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 - (49422 + 10771) / 117532) / (1 - (51350 + 13821) / 126223)
=0.48785863 / 0.48368364
=1.0086

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
=93358 / 100439
=0.9295

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))
=(4678 / (4678 + 13821)) / (3446 / (3446 + 10771))
=0.25287853 / 0.24238588
=1.0433

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)
=(23207 / 93358) / (23644 / 100439)
=0.24858073 / 0.23540657
=1.056

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)
=((35073 + 39600) / 117532) / ((32856 + 40154) / 126223)
=0.63534186 / 0.57842073
=1.0984

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
=(12023 - 2675 - 10809) / 117532
=-0.0124

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 3.93 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 0.91471.09720.98430.92111.06440.9660.98810.15140.886
GMI 0.92150.9570.99160.95870.96360.99240.98250.97440.9898
AQI 0.99890.97581.01330.9740.99821.07220.98171.05541.0337
SGI 0.94641.00321.08051.0490.9241.04291.07060.97750.9545
DEPI 0.89331.06751.00050.92951.05841.02120.99121.02830.9903
SGAI 1.12160.94751.00771.01060.94961.00671.00661.02121.0387
LVGI 0.97211.09111.07171.06330.89371.03521.01461.01781.0183
TATA -0.0939-0.0643-0.0602-0.0724-0.0806-0.0579-0.0428-0.0402-0.0165
M-score -3.11-2.73-2.73-2.91-2.84-2.73-2.65-3.47-2.71

International Business Machines Corp Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 1.11020.15141.06941.06250.14740.880.1420.97366.4838.1476
GMI 0.97930.97430.97550.97630.97320.99880.99580.99871.00860.9726
AQI 1.00211.05541.02411.01321.03431.03371.0661.07241.06561.0086
SGI 0.98350.97750.9650.9650.96450.96110.96390.96650.97070.9295
DEPI 1.03131.02830.99260.98521.00730.99031.00571.01140.84251.0433
SGAI 1.02261.02131.02291.06841.01771.06151.10091.01821.07221.056
LVGI 1.01031.01781.02711.04541.0421.01831.08391.05171.09981.0984
TATA -0.051-0.0402-0.0383-0.0331-0.0187-0.0165-0.0174-0.0137-0.0494-0.0124
M-score -2.65-3.47-2.64-2.64-3.40-2.71-3.40-2.592.273.93
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