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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 6 years, the highest Beneish M-Score of LinkedIn Corp was -2.51. The lowest was -2.65. And the median was -2.65.
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 LinkedIn 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 * 1.0238||+||0.528 * 0.9996||+||0.404 * 1.4796||+||0.892 * 1.4516||+||0.115 * 1.1186|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.028||+||4.679 * -0.1072||-||0.327 * 1.8902|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $449 Mil.|
Revenue was 643.432 + 568.265 + 533.877 + 473.193 = $2,219 Mil.
Gross Profit was 556.53 + 493.361 + 464.341 + 410.738 = $1,925 Mil.
Total Current Assets was $4,122 Mil.
Total Assets was $5,427 Mil.
Property, Plant and Equipment(Net PPE) was $741 Mil.
Depreciation, Depletion and Amortization(DDA) was $237 Mil.
Selling, General & Admin. Expense(SGA) was $1,116 Mil.
Total Current Liabilities was $883 Mil.
Long-Term Debt was $1,082 Mil.
Net Income was 2.995 + -4.263 + -1.034 + -13.445 = $-16 Mil.
Non Operating Income was -1.731 + -1.262 + -0.132 + 0.021 = $-3 Mil.
Cash Flow from Operations was 130.431 + 181.226 + 128.436 + 128.858 = $569 Mil.
|Accounts Receivable was $302 Mil.
Revenue was 447.219 + 392.96 + 363.661 + 324.705 = $1,529 Mil.
Gross Profit was 389.354 + 339.565 + 314.397 + 282.321 = $1,326 Mil.
Total Current Assets was $2,755 Mil.
Total Assets was $3,353 Mil.
Property, Plant and Equipment(Net PPE) was $362 Mil.
Depreciation, Depletion and Amortization(DDA) was $135 Mil.
Selling, General & Admin. Expense(SGA) was $748 Mil.
Total Current Liabilities was $642 Mil.
Long-Term Debt was $0 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)|
|=||(449.048 / 2218.767)||/||(302.168 / 1528.545)|
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)|
|=||(493.361 / 1528.545)||/||(556.53 / 2218.767)|
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 - (4122.1 + 740.909) / 5427.257)||/||(1 - (2755.47 + 361.741) / 3352.793)|
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))|
|=||(134.516 / (134.516 + 361.741))||/||(236.946 / (236.946 + 740.909))|
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)|
|=||(1115.705 / 2218.767)||/||(747.666 / 1528.545)|
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)|
|=||((1081.553 + 882.785) / 5427.257)||/||((0 + 641.991) / 3352.793)|
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|
|=||(-15.747 - -3.104||-||568.951)||/||5427.257|
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.
LinkedIn 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
LinkedIn Corp Annual Data
LinkedIn Corp Quarterly Data