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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 -2.54 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 -2.60.
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 * 1.0221||+||0.528 * 1.0048||+||0.404 * 0.9045||+||0.892 * 1.5128||+||0.115 * 1.0549|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0752||+||4.679 * -0.132||-||0.327 * 0.6349|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|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.
Net Income was -13.445 + 3.782 + -3.363 + 3.734 = $-9 Mil.
Non Operating Income was 0.021 + 0.659 + -0.53 + -0.83 = $-1 Mil.
Cash Flow from Operations was 128.858 + 82.453 + 126.026 + 124.165 = $462 Mil.
|Accounts Receivable was $213 Mil.
Revenue was 324.705 + 303.618 + 252.028 + 228.207 = $1,109 Mil.
Gross Profit was 282.321 + 267.375 + 218.25 + 197.84 = $966 Mil.
Total Current Assets was $1,118 Mil.
Total Assets was $1,510 Mil.
Property, Plant and Equipment(Net PPE) was $216 Mil.
Depreciation, Depletion and Amortization(DDA) was $91 Mil.
Selling, General & Admin. Expense(SGA) was $514 Mil.
Total Current Liabilities was $468 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)|
|=||(328.661 / 1677.033)||/||(212.556 / 1108.558)|
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)|
|=||(389.354 / 1108.558)||/||(410.738 / 1677.033)|
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 - (2779.905 + 406.543) / 3561.869)||/||(1 - (1117.588 + 216.05) / 1509.532)|
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))|
|=||(90.773 / (90.773 + 216.05))||/||(158.45 / (158.45 + 406.543))|
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)|
|=||(836.605 / 1677.033)||/||(514.361 / 1108.558)|
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 + 701.428) / 3561.869)||/||((0 + 468.228) / 1509.532)|
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|
|=||(-9.292 - -0.68||-||461.502)||/||3561.869|
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 -2.54 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