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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 6 years, the highest Beneish M-Score of Intermolecular Inc was -3.05. The lowest was -3.54. And the median was -3.28.
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 Intermolecular 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 * 1.1074||+||0.528 * 1.0723||+||0.404 * 1.1385||+||0.892 * 0.7076||+||0.115 * 0.6809|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.4101||+||4.679 * -0.1886||-||0.327 * 0.9945|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $5.32 Mil.|
Revenue was 11.001 + 10.855 + 9.934 + 15.905 = $47.70 Mil.
Gross Profit was 4.721 + 4.688 + 4.298 + 9.337 = $23.04 Mil.
Total Current Assets was $72.21 Mil.
Total Assets was $105.44 Mil.
Property, Plant and Equipment(Net PPE) was $19.11 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.95 Mil.
Selling, General & Admin. Expense(SGA) was $18.41 Mil.
Total Current Liabilities was $10.13 Mil.
Long-Term Debt was $21.00 Mil.
Net Income was -6.088 + -4.963 + -6.859 + -3.851 = $-21.76 Mil.
Non Operating Income was -0.016 + -0.013 + 0.005 + -0.005 = $-0.03 Mil.
Cash Flow from Operations was -0.256 + -2.253 + -1.388 + 2.047 = $-1.85 Mil.
|Accounts Receivable was $6.79 Mil.
Revenue was 15.617 + 17.748 + 16.608 + 17.433 = $67.41 Mil.
Gross Profit was 7.179 + 8.684 + 9.468 + 9.59 = $34.92 Mil.
Total Current Assets was $81.35 Mil.
Total Assets was $124.48 Mil.
Property, Plant and Equipment(Net PPE) was $28.49 Mil.
Depreciation, Depletion and Amortization(DDA) was $9.40 Mil.
Selling, General & Admin. Expense(SGA) was $18.45 Mil.
Total Current Liabilities was $13.96 Mil.
Long-Term Debt was $23.00 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)|
|=||(5.321 / 47.695)||/||(6.791 / 67.406)|
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)|
|=||(4.688 / 67.406)||/||(4.721 / 47.695)|
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 - (72.208 + 19.106) / 105.437)||/||(1 - (81.352 + 28.485) / 124.482)|
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))|
|=||(9.396 / (9.396 + 28.485))||/||(10.948 / (10.948 + 19.106))|
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)|
|=||(18.406 / 47.695)||/||(18.448 / 67.406)|
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)|
|=||((21 + 10.131) / 105.437)||/||((23 + 13.956) / 124.482)|
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|
|=||(-21.761 - -0.029||-||-1.85)||/||105.437|
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.
Intermolecular Inc has a M-score of -3.54 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
Intermolecular Inc Annual Data
Intermolecular Inc Quarterly Data