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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 KLA-Tencor Corp was -0.16. The lowest was -4.15. And the median was -2.61.
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 KLA-Tencor Corp 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 * 1.1825||+||0.528 * 1.0361||+||0.404 * 1.1112||+||0.892 * 0.9578||+||0.115 * 0.9774|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0839||+||4.679 * -0.0113||-||0.327 * 2.8579|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $632 Mil.|
Revenue was 738.459 + 676.357 + 642.901 + 734.343 = $2,792 Mil.
Gross Profit was 418.177 + 393.144 + 354.434 + 407.678 = $1,573 Mil.
Total Current Assets was $3,967 Mil.
Total Assets was $4,902 Mil.
Property, Plant and Equipment(Net PPE) was $321 Mil.
Depreciation, Depletion and Amortization(DDA) was $83 Mil.
Selling, General & Admin. Expense(SGA) was $401 Mil.
Total Current Liabilities was $977 Mil.
Long-Term Debt was $3,199 Mil.
Net Income was 131.638 + 20.268 + 72.233 + 128.731 = $353 Mil.
Non Operating Income was 0 + -131.669 + 0 + 2.648 = $-129 Mil.
Cash Flow from Operations was 242.417 + 11.084 + 34.926 + 248.64 = $537 Mil.
|Accounts Receivable was $558 Mil.
Revenue was 831.599 + 705.129 + 658.337 + 720.032 = $2,915 Mil.
Gross Profit was 488.773 + 419.315 + 380.68 + 413.228 = $1,702 Mil.
Total Current Assets was $4,542 Mil.
Total Assets was $5,487 Mil.
Property, Plant and Equipment(Net PPE) was $326 Mil.
Depreciation, Depletion and Amortization(DDA) was $81 Mil.
Selling, General & Admin. Expense(SGA) was $387 Mil.
Total Current Liabilities was $888 Mil.
Long-Term Debt was $748 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)|
|=||(631.608 / 2792.06)||/||(557.661 / 2915.097)|
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)|
|=||(393.144 / 2915.097)||/||(418.177 / 2792.06)|
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 - (3967.111 + 321.081) / 4902.22)||/||(1 - (4542.329 + 326.049) / 5486.851)|
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))|
|=||(81.487 / (81.487 + 326.049))||/||(82.58 / (82.58 + 321.081))|
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)|
|=||(401.341 / 2792.06)||/||(386.59 / 2915.097)|
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)|
|=||((3199.299 + 976.615) / 4902.22)||/||((747.783 + 887.647) / 5486.851)|
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|
|=||(352.87 - -129.021||-||537.067)||/||4902.22|
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.
KLA-Tencor Corp has a M-score of -2.96 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
KLA-Tencor Corp Annual Data
KLA-Tencor Corp Quarterly Data