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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 Game Technology was -2.01. The lowest was -3.40. And the median was -2.66.
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 Game Technology 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 * 0.9923||+||0.528 * 0.9669||+||0.404 * 1.1459||+||0.892 * 0.8363||+||0.115 * 1.0739|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1147||+||4.679 * -0.0043||-||0.327 * 0.9099|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $281 Mil.|
Revenue was 450.6 + 536.5 + 467.6 + 512.8 = $1,968 Mil.
Gross Profit was 258.4 + 327.2 + 284.9 + 292.8 = $1,163 Mil.
Total Current Assets was $1,093 Mil.
Total Assets was $3,809 Mil.
Property, Plant and Equipment(Net PPE) was $405 Mil.
Depreciation, Depletion and Amortization(DDA) was $176 Mil.
Selling, General & Admin. Expense(SGA) was $446 Mil.
Total Current Liabilities was $435 Mil.
Long-Term Debt was $1,810 Mil.
Net Income was 35 + 70.8 + 72.1 + 25.7 = $204 Mil.
Non Operating Income was 0.2 + -3.6 + 0.7 + -3.4 = $-6 Mil.
Cash Flow from Operations was 102.9 + 137.8 + 126.6 + -141.3 = $226 Mil.
|Accounts Receivable was $338 Mil.
Revenue was 541.2 + 632.4 + 579 + 600 = $2,353 Mil.
Gross Profit was 309.8 + 356.7 + 337.2 + 341.3 = $1,345 Mil.
Total Current Assets was $1,578 Mil.
Total Assets was $4,348 Mil.
Property, Plant and Equipment(Net PPE) was $467 Mil.
Depreciation, Depletion and Amortization(DDA) was $225 Mil.
Selling, General & Admin. Expense(SGA) was $478 Mil.
Total Current Liabilities was $1,460 Mil.
Long-Term Debt was $1,356 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)|
|=||(280.5 / 1967.5)||/||(338 / 2352.6)|
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)|
|=||(327.2 / 2352.6)||/||(258.4 / 1967.5)|
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 - (1092.7 + 405.2) / 3808.6)||/||(1 - (1578.3 + 467.3) / 4347.5)|
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))|
|=||(225.2 / (225.2 + 467.3))||/||(176 / (176 + 405.2))|
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)|
|=||(445.9 / 1967.5)||/||(478.3 / 2352.6)|
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)|
|=||((1810.2 + 435.2) / 3808.6)||/||((1356.4 + 1460.4) / 4347.5)|
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|
|=||(203.6 - -6.1||-||226)||/||3808.6|
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 Game Technology has a M-score of -2.59 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 Game Technology Annual Data
International Game Technology Quarterly Data