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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 Isis Pharmaceuticals was 10.68. The lowest was -4.67. And the median was -2.38.
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 * 1.5152||+||0.528 * 1||+||0.404 * 0.8711||+||0.892 * 1.3734||+||0.115 * 1.7854|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.972||+||4.679 * -0.0207||-||0.327 * 1.1412|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $26.3 Mil.|
Revenue was 44.063 + 57.076 + 28.161 + 42.249 = $171.5 Mil.
Gross Profit was 44.063 + 57.076 + 28.161 + 42.249 = $171.5 Mil.
Total Current Assets was $681.2 Mil.
Total Assets was $793.8 Mil.
Property, Plant and Equipment(Net PPE) was $88.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $9.4 Mil.
Selling, General & Admin. Expense(SGA) was $18.0 Mil.
Total Current Liabilities was $107.3 Mil.
Long-Term Debt was $231.1 Mil.
Net Income was -26.676 + -12.081 + -31.28 + -24.276 = $-94.3 Mil.
Non Operating Income was 0.538 + -0.26 + 0.397 + 0.305 = $1.0 Mil.
Cash Flow from Operations was 1.944 + -34.015 + -32.328 + -14.492 = $-78.9 Mil.
|Accounts Receivable was $12.6 Mil.
Revenue was 23.585 + 38.092 + 43.36 + 19.873 = $124.9 Mil.
Gross Profit was 23.585 + 38.092 + 43.36 + 19.873 = $124.9 Mil.
Total Current Assets was $763.3 Mil.
Total Assets was $881.9 Mil.
Property, Plant and Equipment(Net PPE) was $87.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $18.2 Mil.
Selling, General & Admin. Expense(SGA) was $13.5 Mil.
Total Current Liabilities was $103.3 Mil.
Long-Term Debt was $226.2 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)|
|=||(26.313 / 171.549)||/||(12.645 / 124.91)|
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)|
|=||(57.076 / 124.91)||/||(44.063 / 171.549)|
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 - (681.163 + 88.068) / 793.803)||/||(1 - (763.304 + 87.273) / 881.916)|
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))|
|=||(18.172 / (18.172 + 87.273))||/||(9.409 / (9.409 + 88.068))|
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)|
|=||(17.989 / 171.549)||/||(13.476 / 124.91)|
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)|
|=||((231.092 + 107.325) / 793.803)||/||((226.186 + 103.278) / 881.916)|
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|
|=||(-94.313 - 0.98||-||-78.891)||/||793.803|
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 -1.77 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