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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.
Li & Fung Ltd has a M-score of -2.59 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Li & Fung Ltd was -2.34. The lowest was -3.06. And the median was -2.46.
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 * 0.9653||+||0.528 * 0.9154||+||0.404 * 1.0322||+||0.892 * 1.0259||+||0.115 * 0.9639|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9671||+||4.679 * -0.0151||-||0.327 * 1.0029|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $2,221 Mil.|
Revenue was $20,745 Mil.
Gross Profit was $3,214 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 $319 Mil.
Selling, General & Admin. Expense(SGA) was $2,433 Mil.
Total Current Liabilities was $4,082 Mil.
Long-Term Debt was $1,255 Mil.
Net Income was $755 Mil.
Non Operating Income was $1 Mil.
Cash Flow from Operations was $943 Mil.
|Accounts Receivable was $2,243 Mil.
Revenue was $20,222 Mil.
Gross Profit was $2,868 Mil.
Total Current Assets was $4,380 Mil.
Total Assets was $12,015 Mil.
Property, Plant and Equipment(Net PPE) was $419 Mil.
Depreciation, Depletion and Amortization(DDA) was $285 Mil.
Selling, General & Admin. Expense(SGA) was $2,453 Mil.
Total Current Liabilities was $3,874 Mil.
Long-Term Debt was $1,255 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)|
|=||(2220.841 / 20745.41)||/||(2242.678 / 20221.806)|
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)|
|=||( / 20221.806)||/||( / 20745.41)|
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 - (4297.74 + 439.599) / 12465.453)||/||(1 - (4379.969 + 418.624) / 12015.152)|
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))|
|=||(285.198 / (285.198 + 418.624))||/||(318.826 / (318.826 + 439.599))|
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)|
|=||(2433.247 / 20745.41)||/||(2452.622 / 20221.806)|
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)|
|=||((1254.915 + 4082.124) / 12465.453)||/||((1255.461 + 3873.938) / 12015.152)|
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|
|=||(755.287 - 0.851||-||942.773)||/||12465.453|
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 -2.59 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
Li & Fung Ltd Annual Data