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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 -4.34. And the median was -2.56.
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 * 0.909||+||0.528 * 0.9445||+||0.404 * 0.889||+||0.892 * 1.2927||+||0.115 * 1.0281|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7505||+||4.679 * -0.0717||-||0.327 * 1.263|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|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 $471 Mil.
Total Current Liabilities was $856 Mil.
Long-Term Debt was $980 Mil.
Net Income was 93.489 + 46.605 + 59.977 + 80.661 = $281 Mil.
Non Operating Income was 3.403 + -31.315 + 0.479 + 55.564 = $28 Mil.
Cash Flow from Operations was 145.605 + 178.03 + 37.087 + 126.839 = $488 Mil.
|Accounts Receivable was $235 Mil.
Revenue was 356.8 + 346.094 + 330.958 + 309.265 = $1,343 Mil.
Gross Profit was 209.94 + 223.409 + 219.292 + 203.647 = $856 Mil.
Total Current Assets was $1,538 Mil.
Total Assets was $2,818 Mil.
Property, Plant and Equipment(Net PPE) was $194 Mil.
Depreciation, Depletion and Amortization(DDA) was $89 Mil.
Selling, General & Admin. Expense(SGA) was $485 Mil.
Total Current Liabilities was $419 Mil.
Long-Term Debt was $831 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)|
|=||(276.675 / 1736.305)||/||(235.437 / 1343.117)|
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)|
|=||(300.54 / 1343.117)||/||(333.941 / 1736.305)|
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 - (1906.954 + 247.643) / 3278.206)||/||(1 - (1537.646 + 193.649) / 2817.696)|
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))|
|=||(89.377 / (89.377 + 193.649))||/||(109.789 / (109.789 + 247.643))|
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)|
|=||(470.677 / 1736.305)||/||(485.141 / 1343.117)|
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)|
|=||((979.836 + 856.401) / 3278.206)||/||((830.69 + 418.925) / 2817.696)|
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|
|=||(280.732 - 28.131||-||487.561)||/||3278.206|
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 -2.75 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