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Li & Fung Ltd (OTCPK:LFUGF)
Beneish M-Score
-2.94 (As of Today)

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.

Li & Fung Ltd has a M-score of -2.94 suggests that the company is not a manipulator.

LFUGF' s 10-Year Beneish M-Score Range
Min: -3.07   Max: -2.22
Current: -2.94

-3.07
-2.22

During the past 13 years, the highest Beneish M-Score of Li & Fung Ltd was -2.22. The lowest was -3.07. And the median was -2.38.


Definition

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 Li & Fung Ltd 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 * 0.8279+0.528 * 1.0312+0.404 * 0.8386+0.892 * 1.0138+0.115 * 0.6286
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0389+4.679 * -0.0199-0.327 * 1.3655
=-2.94

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $1,864 Mil.
Revenue was $19,288 Mil.
Gross Profit was $2,182 Mil.
Total Current Assets was $3,825 Mil.
Total Assets was $8,477 Mil.
Property, Plant and Equipment(Net PPE) was $245 Mil.
Depreciation, Depletion and Amortization(DDA) was $115 Mil.
Selling, General & Admin. Expense(SGA) was $1,640 Mil.
Total Current Liabilities was $3,702 Mil.
Long-Term Debt was $1,254 Mil.
Net Income was $470 Mil.
Non Operating Income was $0 Mil.
Cash Flow from Operations was $638 Mil.
Accounts Receivable was $2,221 Mil.
Revenue was $19,026 Mil.
Gross Profit was $2,219 Mil.
Total Current Assets was $4,298 Mil.
Total Assets was $12,465 Mil.
Property, Plant and Equipment(Net PPE) was $440 Mil.
Depreciation, Depletion and Amortization(DDA) was $110 Mil.
Selling, General & Admin. Expense(SGA) was $1,557 Mil.
Total Current Liabilities was $4,082 Mil.
Long-Term Debt was $1,255 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(1864.021 / 19288.499) / (2220.841 / 19025.512)
=0.09663899 / 0.11672963
=0.8279

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=( / 19025.512) / ( / 19288.499)
=0.11662877 / 0.11309895
=1.0312

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (3824.872 + 244.907) / 8477.022) / (1 - (4297.74 + 439.599) / 12465.453)
=0.51990463 / 0.61996255
=0.8386

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=19288.499 / 19025.512
=1.0138

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))
=(110.463 / (110.463 + 439.599)) / (114.983 / (114.983 + 244.907))
=0.20081918 / 0.31949485
=0.6286

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)
=(1640.09 / 19288.499) / (1557.146 / 19025.512)
=0.08502943 / 0.08184516
=1.0389

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)
=((1254.369 + 3701.518) / 8477.022) / ((1254.915 + 4082.124) / 12465.453)
=0.58462595 / 0.42814641
=1.3655

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(469.646 - 0 - 637.939) / 8477.022
=-0.0199

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.

Li & Fung Ltd has a M-score of -2.94 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Li & Fung Ltd Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.90461.08670.7661.10821.05250.8279
GMI 0.90690.8490.91291.05111.21621.0312
AQI 1.15451.16081.15350.98751.0320.8386
SGI 0.9431.18111.25881.00960.94081.0138
DEPI 00.8860.82771.01242.01780.6286
SGAI 1.03461.13841.15091.10820.67481.0389
LVGI 0.90680.84410.93530.94721.00311.3655
TATA -0.081-0.0207-0.02220.003-0.0079-0.0199
M-score -3.07-2.34-2.58-2.34-2.22-2.94
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