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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 -4.30. 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 * 0.916||+||0.528 * 1.0045||+||0.404 * 0.8622||+||0.892 * 1.0805||+||0.115 * 1.6337|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0285||+||4.679 * -0.0539||-||0.327 * 0.9284|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $381 Mil.|
Revenue was 619.347 + 607.139 + 600.124 + 571.763 = $2,398 Mil.
Gross Profit was 419.439 + 426.15 + 423.805 + 397.054 = $1,666 Mil.
Total Current Assets was $2,318 Mil.
Total Assets was $4,281 Mil.
Property, Plant and Equipment(Net PPE) was $713 Mil.
Depreciation, Depletion and Amortization(DDA) was $141 Mil.
Selling, General & Admin. Expense(SGA) was $583 Mil.
Total Current Liabilities was $705 Mil.
Long-Term Debt was $1,048 Mil.
Net Income was 115.219 + 128.888 + 120.412 + 89.587 = $454 Mil.
Non Operating Income was -3.588 + -0.186 + -0.15 + 1.452 = $-2 Mil.
Cash Flow from Operations was 280.153 + 150.3 + 217.047 + 39.738 = $687 Mil.
|Accounts Receivable was $385 Mil.
Revenue was 591.548 + 550.271 + 539.378 + 538.565 = $2,220 Mil.
Gross Profit was 410.359 + 387.539 + 376.365 + 375.027 = $1,549 Mil.
Total Current Assets was $2,097 Mil.
Total Assets was $3,688 Mil.
Property, Plant and Equipment(Net PPE) was $343 Mil.
Depreciation, Depletion and Amortization(DDA) was $126 Mil.
Selling, General & Admin. Expense(SGA) was $525 Mil.
Total Current Liabilities was $610 Mil.
Long-Term Debt was $1,016 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)|
|=||(380.93 / 2398.373)||/||(384.893 / 2219.762)|
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)|
|=||(1549.29 / 2219.762)||/||(1666.448 / 2398.373)|
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 - (2318.091 + 713.334) / 4280.6)||/||(1 - (2096.823 + 342.694) / 3687.747)|
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))|
|=||(126.419 / (126.419 + 342.694))||/||(140.915 / (140.915 + 713.334))|
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)|
|=||(583.005 / 2398.373)||/||(524.657 / 2219.762)|
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)|
|=||((1047.805 + 704.665) / 4280.6)||/||((1015.649 + 610.494) / 3687.747)|
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|
|=||(454.106 - -2.472||-||687.238)||/||4280.6|
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.
Illumina Inc has a M-score of -2.70 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
Illumina Inc Annual Data
Illumina Inc Quarterly Data