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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 7 years, the highest Beneish M-Score of LinkedIn Corp was -1.67. The lowest was -3.01. 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 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 * 1.0173||+||0.528 * 1.0061||+||0.404 * 2.8667||+||0.892 * 1.3485||+||0.115 * 0.8556|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0056||+||4.679 * -0.1442||-||0.327 * 0.9141|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $583 Mil.|
Revenue was 860.65 + 861.894 + 779.595 + 711.735 = $3,214 Mil.
Gross Profit was 743.122 + 742.896 + 668.227 + 611.649 = $2,766 Mil.
Total Current Assets was $3,968 Mil.
Total Assets was $7,209 Mil.
Property, Plant and Equipment(Net PPE) was $1,139 Mil.
Depreciation, Depletion and Amortization(DDA) was $489 Mil.
Selling, General & Admin. Expense(SGA) was $1,629 Mil.
Total Current Liabilities was $1,207 Mil.
Long-Term Debt was $1,138 Mil.
Net Income was -45.827 + -15.325 + -40.523 + -67.748 = $-169 Mil.
Non Operating Income was -4.19 + -13.935 + -3.784 + -1.723 = $-24 Mil.
Cash Flow from Operations was 252.187 + 176.606 + 239.595 + 225.642 = $894 Mil.
|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.
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)|
|=||(582.726 / 3213.874)||/||(424.787 / 2383.261)|
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)|
|=||(742.896 / 2383.261)||/||(743.122 / 3213.874)|
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 - (3968.396 + 1139.032) / 7209.367)||/||(1 - (4219.519 + 755.396) / 5538.164)|
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))|
|=||(261.178 / (261.178 + 755.396))||/||(488.785 / (488.785 + 1139.032))|
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)|
|=||(1629.35 / 3213.874)||/||(1201.514 / 2383.261)|
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)|
|=||((1138.264 + 1206.515) / 7209.367)||/||((1092.715 + 877.742) / 5538.164)|
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|
|=||(-169.423 - -23.632||-||894.03)||/||7209.367|
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 -2.06 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
LinkedIn Corp Annual Data
LinkedIn Corp Quarterly Data