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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.
Iridex Corporation has a M-score of -2.08 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Iridex Corporation was 0.05. The lowest was -4.05. And the median was -2.41.
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 Iridex Corporation 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 * 1.1857||+||0.528 * 0.9941||+||0.404 * 0.7273||+||0.892 * 1.1304||+||0.115 * 0.9892|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8793||+||4.679 * 0.044||-||0.327 * 0.9927|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $7.35 Mil.|
Revenue was 10.598 + 9.526 + 9.21 + 8.939 = $38.27 Mil.
Gross Profit was 5.15 + 4.724 + 4.482 + 4.231 = $18.59 Mil.
Total Current Assets was $31.97 Mil.
Total Assets was $33.68 Mil.
Property, Plant and Equipment(Net PPE) was $0.54 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.49 Mil.
Selling, General & Admin. Expense(SGA) was $12.74 Mil.
Total Current Liabilities was $7.36 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was 0.412 + 0.53 + 0.415 + 0.874 = $2.23 Mil.
Non Operating Income was 0 + 0 + 0 + -0.018 = $-0.02 Mil.
Cash Flow from Operations was -0.59 + 0.691 + 1.072 + -0.406 = $0.77 Mil.
|Accounts Receivable was $5.48 Mil.
Revenue was 9.228 + 7.881 + 8.445 + 8.305 = $33.86 Mil.
Gross Profit was 4.338 + 3.911 + 4.111 + 3.986 = $16.35 Mil.
Total Current Assets was $27.06 Mil.
Total Assets was $28.91 Mil.
Property, Plant and Equipment(Net PPE) was $0.48 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.43 Mil.
Selling, General & Admin. Expense(SGA) was $12.82 Mil.
Total Current Liabilities was $6.37 Mil.
Long-Term Debt was $0.00 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)|
|=||(7.345 / 38.273)||/||(5.48 / 33.859)|
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)|
|=||(4.724 / 33.859)||/||(5.15 / 38.273)|
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 - (31.97 + 0.543) / 33.677)||/||(1 - (27.055 + 0.483) / 28.912)|
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))|
|=||(0.427 / (0.427 + 0.483))||/||(0.49 / (0.49 + 0.543))|
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)|
|=||(12.743 / 38.273)||/||(12.821 / 33.859)|
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)|
|=||((0 + 7.362) / 33.677)||/||((0 + 6.367) / 28.912)|
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|
|=||(2.231 - -0.018||-||0.767)||/||33.677|
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.
Iridex Corporation has a M-score of -2.08 signals that the company is likely to 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
Iridex Corporation Annual Data
Iridex Corporation Quarterly Data