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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 * 1.0752||+||0.528 * 1.0188||+||0.404 * 1.1096||+||0.892 * 1.0258||+||0.115 * 0.9877|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9861||+||4.679 * 0.0043||-||0.327 * 2.7024|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $632 Mil.|
Revenue was 676.357 + 642.901 + 734.343 + 831.599 = $2,885 Mil.
Gross Profit was 393.144 + 354.434 + 407.678 + 488.773 = $1,644 Mil.
Total Current Assets was $4,046 Mil.
Total Assets was $4,987 Mil.
Property, Plant and Equipment(Net PPE) was $323 Mil.
Depreciation, Depletion and Amortization(DDA) was $83 Mil.
Selling, General & Admin. Expense(SGA) was $396 Mil.
Total Current Liabilities was $942 Mil.
Long-Term Debt was $3,209 Mil.
Net Income was 20.268 + 72.233 + 128.731 + 203.581 = $425 Mil.
Non Operating Income was -131.669 + 0 + 2.648 + 0 = $-129 Mil.
Cash Flow from Operations was 11.084 + 34.926 + 248.64 + 237.727 = $532 Mil.
|Accounts Receivable was $573 Mil.
Revenue was 705.129 + 658.337 + 720.032 + 729.029 = $2,813 Mil.
Gross Profit was 419.315 + 380.68 + 413.228 + 419.521 = $1,633 Mil.
Total Current Assets was $4,508 Mil.
Total Assets was $5,441 Mil.
Property, Plant and Equipment(Net PPE) was $326 Mil.
Depreciation, Depletion and Amortization(DDA) was $82 Mil.
Selling, General & Admin. Expense(SGA) was $392 Mil.
Total Current Liabilities was $928 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)|
|=||(632.089 / 2885.2)||/||(573.077 / 2812.527)|
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)|
|=||(354.434 / 2812.527)||/||(393.144 / 2885.2)|
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 - (4046.248 + 323.353) / 4987.366)||/||(1 - (4507.534 + 325.856) / 5440.734)|
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))|
|=||(82.041 / (82.041 + 325.856))||/||(82.684 / (82.684 + 323.353))|
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)|
|=||(396.182 / 2885.2)||/||(391.628 / 2812.527)|
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)|
|=||((3208.571 + 942.34) / 4987.366)||/||((747.647 + 927.999) / 5440.734)|
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|
|=||(424.813 - -129.021||-||532.377)||/||4987.366|
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 -2.87 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