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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.
LinkedIn Corp has a M-score of -2.27 suggests that the company is not a manipulator.
During the past 5 years, the highest Beneish M-Score of LinkedIn Corp was -2.05. 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 * 1.1298||+||0.528 * 1||+||0.404 * 1.9264||+||0.892 * 1.4604||+||0.115 * 0.941|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0474||+||4.679 * -0.137||-||0.327 * 1.1195|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $345 Mil.|
Revenue was 568.265 + 533.877 + 473.193 + 447.219 = $2,023 Mil.
Gross Profit was 493.361 + 464.341 + 410.738 + 389.354 = $1,758 Mil.
Total Current Assets was $2,785 Mil.
Total Assets was $3,906 Mil.
Property, Plant and Equipment(Net PPE) was $557 Mil.
Depreciation, Depletion and Amortization(DDA) was $209 Mil.
Selling, General & Admin. Expense(SGA) was $1,017 Mil.
Total Current Liabilities was $759 Mil.
Long-Term Debt was $0 Mil.
Net Income was -4.263 + -1.034 + -13.445 + 3.782 = $-15 Mil.
Non Operating Income was -1.262 + -0.132 + 0.021 + 0.659 = $-1 Mil.
Cash Flow from Operations was 181.226 + 128.436 + 128.858 + 82.453 = $521 Mil.
|Accounts Receivable was $209 Mil.
Revenue was 392.96 + 363.661 + 324.705 + 303.618 = $1,385 Mil.
Gross Profit was 339.565 + 314.397 + 282.321 + 267.375 = $1,204 Mil.
Total Current Assets was $2,572 Mil.
Total Assets was $3,144 Mil.
Property, Plant and Equipment(Net PPE) was $337 Mil.
Depreciation, Depletion and Amortization(DDA) was $116 Mil.
Selling, General & Admin. Expense(SGA) was $665 Mil.
Total Current Liabilities was $546 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)|
|=||(344.773 / 2022.554)||/||(208.956 / 1384.944)|
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)|
|=||(464.341 / 1384.944)||/||(493.361 / 2022.554)|
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 - (2784.744 + 557.017) / 3906.012)||/||(1 - (2571.838 + 336.656) / 3144.278)|
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))|
|=||(116.063 / (116.063 + 336.656))||/||(208.578 / (208.578 + 557.017))|
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)|
|=||(1016.781 / 2022.554)||/||(664.725 / 1384.944)|
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)|
|=||((0 + 759.217) / 3906.012)||/||((0 + 545.938) / 3144.278)|
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|
|=||(-14.96 - -0.714||-||520.973)||/||3906.012|
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 -2.27 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