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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.
Illumina Inc has a M-score of -2.59 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Illumina Inc was 5.91. The lowest was -6.45. And the median was -2.53.
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 * 0.984||+||0.528 * 1.0186||+||0.404 * 1.1133||+||0.892 * 1.2675||+||0.115 * 0.9073|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.6998||+||4.679 * -0.0763||-||0.327 * 1.2158|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $259 Mil.|
Revenue was 447.568 + 420.781 + 387.326 + 356.8 = $1,612 Mil.
Gross Profit was 300.54 + 278.292 + 259.246 + 209.94 = $1,048 Mil.
Total Current Assets was $1,621 Mil.
Total Assets was $3,035 Mil.
Property, Plant and Equipment(Net PPE) was $230 Mil.
Depreciation, Depletion and Amortization(DDA) was $110 Mil.
Selling, General & Admin. Expense(SGA) was $440 Mil.
Total Current Liabilities was $649 Mil.
Long-Term Debt was $973 Mil.
Net Income was 46.605 + 59.977 + 80.661 + 31.357 = $219 Mil.
Non Operating Income was -31.315 + 0.479 + 55.564 + 0.37 = $25 Mil.
Cash Flow from Operations was 178.03 + 37.087 + 126.839 + 83.136 = $425 Mil.
|Accounts Receivable was $207 Mil.
Revenue was 346.094 + 330.958 + 309.265 + 285.874 = $1,272 Mil.
Gross Profit was 223.409 + 219.292 + 203.647 + 195.873 = $842 Mil.
Total Current Assets was $1,646 Mil.
Total Assets was $2,823 Mil.
Property, Plant and Equipment(Net PPE) was $187 Mil.
Depreciation, Depletion and Amortization(DDA) was $78 Mil.
Selling, General & Admin. Expense(SGA) was $496 Mil.
Total Current Liabilities was $419 Mil.
Long-Term Debt was $822 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)|
|=||(258.694 / 1612.475)||/||(207.413 / 1272.191)|
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)|
|=||(278.292 / 1272.191)||/||(300.54 / 1612.475)|
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 - (1620.721 + 230.113) / 3035.055)||/||(1 - (1646.391 + 187.362) / 2823.202)|
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))|
|=||(77.803 / (77.803 + 187.362))||/||(109.978 / (109.978 + 230.113))|
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)|
|=||(439.675 / 1612.475)||/||(495.688 / 1272.191)|
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)|
|=||((972.945 + 649.207) / 3035.055)||/||((822.169 + 418.88) / 2823.202)|
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|
|=||(218.6 - 25.098||-||425.092)||/||3035.055|
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 -2.59 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