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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.
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.
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|
|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
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)|
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)|
|=||(10874 / 100439)||/||(12862 / 93358)|
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 - (49422 + 10771) / 117532)||/||(1 - (51350 + 13821) / 126223)|
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))|
|=||(4678 / (4678 + 13821))||/||(3446 / (3446 + 10771))|
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)|
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)|
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|
|=||(12023 - 2675||-||10809)||/||117532|
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.
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