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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 -2.05. The lowest was -3.01. And the median was -2.60.
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 * 0.9095||+||0.528 * 1.0014||+||0.404 * 0.9649||+||0.892 * 1.4211||+||0.115 * 1.0916|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0106||+||4.679 * -0.1161||-||0.327 * 1.8067|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $425 Mil.|
Revenue was 637.687 + 643.432 + 568.265 + 533.877 = $2,383 Mil.
Gross Profit was 549.281 + 556.53 + 493.361 + 464.341 = $2,064 Mil.
Total Current Assets was $4,220 Mil.
Total Assets was $5,538 Mil.
Property, Plant and Equipment(Net PPE) was $755 Mil.
Depreciation, Depletion and Amortization(DDA) was $261 Mil.
Selling, General & Admin. Expense(SGA) was $1,202 Mil.
Total Current Liabilities was $878 Mil.
Long-Term Debt was $1,093 Mil.
Net Income was -42.548 + 2.995 + -4.263 + -1.034 = $-45 Mil.
Non Operating Income was -4.035 + -1.731 + -1.262 + -0.132 = $-7 Mil.
Cash Flow from Operations was 165.132 + 130.431 + 181.226 + 128.436 = $605 Mil.
|Accounts Receivable was $329 Mil.
Revenue was 473.193 + 447.219 + 392.96 + 363.661 = $1,677 Mil.
Gross Profit was 410.738 + 389.354 + 339.565 + 314.397 = $1,454 Mil.
Total Current Assets was $2,780 Mil.
Total Assets was $3,562 Mil.
Property, Plant and Equipment(Net PPE) was $407 Mil.
Depreciation, Depletion and Amortization(DDA) was $158 Mil.
Selling, General & Admin. Expense(SGA) was $837 Mil.
Total Current Liabilities was $701 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)|
|=||(424.787 / 2383.261)||/||(328.661 / 1677.033)|
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)|
|=||(556.53 / 1677.033)||/||(549.281 / 2383.261)|
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 - (4219.519 + 755.396) / 5538.164)||/||(1 - (2779.905 + 406.543) / 3561.869)|
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))|
|=||(158.45 / (158.45 + 406.543))||/||(261.178 / (261.178 + 755.396))|
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)|
|=||(1201.514 / 2383.261)||/||(836.605 / 1677.033)|
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)|
|=||((1092.715 + 877.742) / 5538.164)||/||((0 + 701.428) / 3561.869)|
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|
|=||(-44.85 - -7.16||-||605.225)||/||5538.164|
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 -3.00 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