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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 3.88. The lowest was -3.47. 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 * 0.8992||+||0.528 * 1.0086||+||0.404 * 1.0656||+||0.892 * 0.9707||+||0.115 * 0.8425|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0477||+||4.679 * -0.0489||-||0.327 * 1.0998|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $1,469 Mil.|
Revenue was 22397 + 24364 + 22484 + 28769 = $98,014 Mil.
Gross Profit was 10874 + 11975 + 10543 + 14158 = $47,550 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 $23,237 Mil.
Total Current Liabilities was $42,306 Mil.
Long-Term Debt was $32,821 Mil.
Net Income was 18 + 4137 + 2384 + 6184 = $12,723 Mil.
Non Operating Income was 228 + 370 + 310 + 293 = $1,201 Mil.
Cash Flow from Operations was 3904 + 3579 + 3326 + 6528 = $17,337 Mil.
|Accounts Receivable was $1,683 Mil.
Revenue was 23338 + 24924 + 23408 + 29304 = $100,974 Mil.
Gross Profit was 11429 + 12132 + 10678 + 15167 = $49,406 Mil.
Total Current Assets was $47,533 Mil.
Total Assets was $117,845 Mil.
Property, Plant and Equipment(Net PPE) was $13,877 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,616 Mil.
Selling, General & Admin. Expense(SGA) was $22,849 Mil.
Total Current Liabilities was $39,222 Mil.
Long-Term Debt was $28,478 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)|
|=||(1469 / 98014)||/||(1683 / 100974)|
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)|
|=||(11975 / 100974)||/||(10874 / 98014)|
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 - (47164 + 11068) / 118911)||/||(1 - (47533 + 13877) / 117845)|
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))|
|=||(4616 / (4616 + 13877))||/||(4660 / (4660 + 11068))|
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)|
|=||(23237 / 98014)||/||(22849 / 100974)|
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)|
|=||((32821 + 42306) / 118911)||/||((28478 + 39222) / 117845)|
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|
|=||(12723 - 1201||-||17337)||/||118911|
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 -2.86 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