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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 -2.04. The lowest was -3.34. And the median was -2.68.
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 * 1.0748||+||0.528 * 0.973||+||0.404 * 1.1576||+||0.892 * 0.8789||+||0.115 * 1.0305|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1242||+||4.679 * 0.0142||-||0.327 * 0.9747|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $329 Mil.|
Revenue was 536.5 + 467.6 + 512.8 + 541.2 = $2,058 Mil.
Gross Profit was 327.2 + 284.9 + 292.8 + 309.8 = $1,215 Mil.
Total Current Assets was $1,221 Mil.
Total Assets was $3,990 Mil.
Property, Plant and Equipment(Net PPE) was $413 Mil.
Depreciation, Depletion and Amortization(DDA) was $189 Mil.
Selling, General & Admin. Expense(SGA) was $455 Mil.
Total Current Liabilities was $545 Mil.
Long-Term Debt was $1,879 Mil.
Net Income was 70.8 + 72.1 + 25.7 + 79.2 = $248 Mil.
Non Operating Income was -3.6 + 0.7 + -3.4 + -1.9 = $-8 Mil.
Cash Flow from Operations was 137.8 + 126.6 + -141.3 + 76.1 = $199 Mil.
|Accounts Receivable was $349 Mil.
Revenue was 632.4 + 579 + 600 + 530.3 = $2,342 Mil.
Gross Profit was 356.7 + 337.2 + 341.3 + 309.5 = $1,345 Mil.
Total Current Assets was $1,776 Mil.
Total Assets was $4,613 Mil.
Property, Plant and Equipment(Net PPE) was $484 Mil.
Depreciation, Depletion and Amortization(DDA) was $232 Mil.
Selling, General & Admin. Expense(SGA) was $461 Mil.
Total Current Liabilities was $1,509 Mil.
Long-Term Debt was $1,366 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)|
|=||(329.3 / 2058.1)||/||(348.6 / 2341.7)|
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)|
|=||(284.9 / 2341.7)||/||(327.2 / 2058.1)|
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 - (1221.1 + 412.7) / 3989.5)||/||(1 - (1776 + 483.9) / 4612.8)|
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))|
|=||(231.6 / (231.6 + 483.9))||/||(189 / (189 + 412.7))|
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)|
|=||(455.2 / 2058.1)||/||(460.7 / 2341.7)|
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)|
|=||((1878.6 + 544.8) / 3989.5)||/||((1366.3 + 1508.5) / 4612.8)|
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|
|=||(247.8 - -8.2||-||199.2)||/||3989.5|
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 -2.41 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