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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 4.37. The lowest was -4.23. And the median was -2.53.
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 * 1.358||+||0.528 * 0.9225||+||0.404 * 1.1801||+||0.892 * 1.1445||+||0.115 * 1.1782|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8526||+||4.679 * -0.0004||-||0.327 * 0.8768|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $664 Mil.|
Revenue was 876.885 + 750.673 + 919.171 + 712.433 = $3,259 Mil.
Gross Profit was 558.378 + 472.837 + 581.603 + 437.834 = $2,051 Mil.
Total Current Assets was $4,032 Mil.
Total Assets was $5,094 Mil.
Property, Plant and Equipment(Net PPE) was $280 Mil.
Depreciation, Depletion and Amortization(DDA) was $60 Mil.
Selling, General & Admin. Expense(SGA) was $379 Mil.
Total Current Liabilities was $1,188 Mil.
Long-Term Debt was $2,729 Mil.
Net Income was 238.251 + 178.101 + 271.541 + 175.777 = $864 Mil.
Non Operating Income was 3.535 + 3.736 + -5.483 + 5.988 = $8 Mil.
Cash Flow from Operations was 222.413 + 169.777 + 354.093 + 111.497 = $858 Mil.
|Accounts Receivable was $427 Mil.
Revenue was 710.245 + 642.644 + 756.332 + 738.459 = $2,848 Mil.
Gross Profit was 429.265 + 372.4 + 433.065 + 418.177 = $1,653 Mil.
Total Current Assets was $3,685 Mil.
Total Assets was $4,573 Mil.
Property, Plant and Equipment(Net PPE) was $292 Mil.
Depreciation, Depletion and Amortization(DDA) was $77 Mil.
Selling, General & Admin. Expense(SGA) was $389 Mil.
Total Current Liabilities was $858 Mil.
Long-Term Debt was $3,151 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)|
|=||(663.852 / 3259.162)||/||(427.115 / 2847.68)|
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)|
|=||(1652.907 / 2847.68)||/||(2050.652 / 3259.162)|
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 - (4031.639 + 279.966) / 5094.456)||/||(1 - (3684.705 + 292.393) / 4572.516)|
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))|
|=||(76.74 / (76.74 + 292.393))||/||(59.982 / (59.982 + 279.966))|
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)|
|=||(379.124 / 3259.162)||/||(388.542 / 2847.68)|
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)|
|=||((2729.239 + 1187.736) / 5094.456)||/||((3151.25 + 858.33) / 4572.516)|
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|
|=||(863.67 - 7.776||-||857.78)||/||5094.456|
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 -1.91 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
KLA-Tencor Corp Annual Data
KLA-Tencor Corp Quarterly Data