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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 -4.23. And the median was -2.62.
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 * 0.9789||+||0.528 * 0.9507||+||0.404 * 0.9813||+||0.892 * 1.0106||+||0.115 * 1.0224|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9303||+||4.679 * -0.0303||-||0.327 * 1.0053|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $625 Mil.|
Revenue was 712.433 + 710.245 + 642.644 + 756.332 = $2,822 Mil.
Gross Profit was 437.834 + 429.265 + 372.4 + 433.065 = $1,673 Mil.
Total Current Assets was $3,906 Mil.
Total Assets was $4,782 Mil.
Property, Plant and Equipment(Net PPE) was $288 Mil.
Depreciation, Depletion and Amortization(DDA) was $72 Mil.
Selling, General & Admin. Expense(SGA) was $377 Mil.
Total Current Liabilities was $998 Mil.
Long-Term Debt was $3,097 Mil.
Net Income was 175.777 + 152.207 + 104.897 + 142.019 = $575 Mil.
Non Operating Income was 5.988 + 0 + 0 + -9.415 = $-3 Mil.
Cash Flow from Operations was 111.497 + 100.324 + 193.782 + 317.479 = $723 Mil.
|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.
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)|
|=||(624.818 / 2821.654)||/||(631.608 / 2792.06)|
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)|
|=||(1573.433 / 2792.06)||/||(1672.564 / 2821.654)|
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 - (3906.473 + 287.874) / 4782.102)||/||(1 - (3967.111 + 321.081) / 4902.22)|
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))|
|=||(82.58 / (82.58 + 321.081))||/||(72.01 / (72.01 + 287.874))|
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)|
|=||(377.341 / 2821.654)||/||(401.341 / 2792.06)|
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)|
|=||((3097.306 + 997.692) / 4782.102)||/||((3199.299 + 976.615) / 4902.22)|
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|
|=||(574.9 - -3.427||-||723.082)||/||4782.102|
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 -2.65 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