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Beneish M-Score 2.97 higher than -2.22, which implies that it might have manipulated its financial results.
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.
Isis Pharmaceuticals has a M-score of 2.97 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Isis Pharmaceuticals was 9.78. The lowest was -4.67. And the median was -2.44.
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 Isis Pharmaceuticals 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 * 7.7524||+||0.528 * 1||+||0.404 * 0.5463||+||0.892 * 1.0811||+||0.115 * 1.3062|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1329||+||4.679 * -0.1602||-||0.327 * 0.7455|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $9.8 Mil.|
Revenue was 28.161 + 42.249 + 23.585 + 38.092 = $132.1 Mil.
Gross Profit was 28.161 + 42.249 + 23.585 + 38.092 = $132.1 Mil.
Total Current Assets was $722.1 Mil.
Total Assets was $834.6 Mil.
Property, Plant and Equipment(Net PPE) was $86.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $9.5 Mil.
Selling, General & Admin. Expense(SGA) was $15.9 Mil.
Total Current Liabilities was $100.8 Mil.
Long-Term Debt was $228.9 Mil.
Net Income was -31.28 + -24.276 + -24.57 + -10.126 = $-90.3 Mil.
Non Operating Income was 0.397 + 0.305 + 0.175 + 0.84 = $1.7 Mil.
Cash Flow from Operations was -32.328 + -14.492 + 65.821 + 22.74 = $41.7 Mil.
|Accounts Receivable was $1.2 Mil.
Revenue was 43.36 + 19.873 + 11.601 + 47.34 = $122.2 Mil.
Gross Profit was 43.36 + 19.873 + 11.601 + 47.34 = $122.2 Mil.
Total Current Assets was $431.8 Mil.
Total Assets was $553.0 Mil.
Property, Plant and Equipment(Net PPE) was $89.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $13.3 Mil.
Selling, General & Admin. Expense(SGA) was $13.0 Mil.
Total Current Liabilities was $70.3 Mil.
Long-Term Debt was $222.8 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)|
|=||(9.823 / 132.087)||/||(1.172 / 122.174)|
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)|
|=||(42.249 / 122.174)||/||(28.161 / 132.087)|
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 - (722.053 + 86.641) / 834.616)||/||(1 - (431.829 + 89.694) / 552.961)|
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))|
|=||(13.316 / (13.316 + 89.694))||/||(9.516 / (9.516 + 86.641))|
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)|
|=||(15.876 / 132.087)||/||(12.962 / 122.174)|
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)|
|=||((228.923 + 100.836) / 834.616)||/||((222.759 + 70.295) / 552.961)|
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|
|=||(-90.252 - 1.717||-||41.741)||/||834.616|
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.
Isis Pharmaceuticals has a M-score of 2.97 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
Isis Pharmaceuticals Annual Data
Isis Pharmaceuticals Quarterly Data