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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 Illumina Inc was 5.89. The lowest was -4.42. And the median was -2.54.
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 Illumina Inc 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 * 1.2122||+||0.528 * 0.9482||+||0.404 * 0.949||+||0.892 * 1.2328||+||0.115 * 1.0743|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.187||+||4.679 * -0.0154||-||0.327 * 0.7612|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $413 Mil.|
Revenue was 550.271 + 539.378 + 538.565 + 512.379 = $2,141 Mil.
Gross Profit was 387.539 + 376.365 + 375.027 + 384.937 = $1,524 Mil.
Total Current Assets was $2,210 Mil.
Total Assets was $3,734 Mil.
Property, Plant and Equipment(Net PPE) was $309 Mil.
Depreciation, Depletion and Amortization(DDA) was $124 Mil.
Selling, General & Admin. Expense(SGA) was $507 Mil.
Total Current Liabilities was $584 Mil.
Long-Term Debt was $1,008 Mil.
Net Income was 118.177 + 102.247 + 136.658 + 153.28 = $510 Mil.
Non Operating Income was -1.811 + -0.9 + 11.391 + -0.693 = $8 Mil.
Cash Flow from Operations was 180.994 + 171.445 + 66.779 + 140.549 = $560 Mil.
|Accounts Receivable was $277 Mil.
Revenue was 480.63 + 447.568 + 420.781 + 387.326 = $1,736 Mil.
Gross Profit was 333.941 + 300.54 + 278.292 + 259.246 = $1,172 Mil.
Total Current Assets was $1,907 Mil.
Total Assets was $3,278 Mil.
Property, Plant and Equipment(Net PPE) was $248 Mil.
Depreciation, Depletion and Amortization(DDA) was $110 Mil.
Selling, General & Admin. Expense(SGA) was $347 Mil.
Total Current Liabilities was $856 Mil.
Long-Term Debt was $980 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)|
|=||(413.474 / 2140.593)||/||(276.675 / 1736.305)|
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)|
|=||(376.365 / 1736.305)||/||(387.539 / 2140.593)|
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 - (2210.428 + 308.722) / 3733.548)||/||(1 - (1906.954 + 247.643) / 3278.206)|
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))|
|=||(109.789 / (109.789 + 247.643))||/||(123.61 / (123.61 + 308.722))|
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)|
|=||(507.396 / 2140.593)||/||(346.733 / 1736.305)|
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)|
|=||((1007.935 + 583.857) / 3733.548)||/||((979.836 + 856.401) / 3278.206)|
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|
|=||(510.362 - 7.987||-||559.767)||/||3733.548|
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.
Illumina Inc has a M-score of -2.14 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
Illumina Inc Annual Data
Illumina Inc Quarterly Data