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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 -2.55.
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 * 0.8334||+||0.528 * 1.0182||+||0.404 * 0.9571||+||0.892 * 1.1074||+||0.115 * 1.6161|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0696||+||4.679 * -0.0482||-||0.327 * 0.9263|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $382 Mil.|
Revenue was 607.139 + 600.124 + 571.763 + 591.548 = $2,371 Mil.
Gross Profit was 426.15 + 423.805 + 397.054 + 410.359 = $1,657 Mil.
Total Current Assets was $2,278 Mil.
Total Assets was $4,228 Mil.
Property, Plant and Equipment(Net PPE) was $634 Mil.
Depreciation, Depletion and Amortization(DDA) was $136 Mil.
Selling, General & Admin. Expense(SGA) was $584 Mil.
Total Current Liabilities was $629 Mil.
Long-Term Debt was $1,041 Mil.
Net Income was 128.888 + 120.412 + 89.587 + 104.477 = $443 Mil.
Non Operating Income was -0.186 + -0.15 + 1.452 + -1.282 = $-0 Mil.
Cash Flow from Operations was 150.3 + 217.047 + 39.738 + 240.378 = $647 Mil.
|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 $493 Mil.
Total Current Liabilities was $584 Mil.
Long-Term Debt was $1,008 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)|
|=||(381.632 / 2370.574)||/||(413.474 / 2140.593)|
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)|
|=||(1523.868 / 2140.593)||/||(1657.368 / 2370.574)|
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 - (2277.836 + 633.856) / 4227.827)||/||(1 - (2210.428 + 308.722) / 3733.548)|
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))|
|=||(123.61 / (123.61 + 308.722))||/||(136.245 / (136.245 + 633.856))|
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)|
|=||(584.165 / 2370.574)||/||(493.155 / 2140.593)|
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)|
|=||((1040.765 + 628.855) / 4227.827)||/||((1007.935 + 583.857) / 3733.548)|
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|
|=||(443.364 - -0.166||-||647.463)||/||4227.827|
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 -2.69 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