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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 13 years, the highest Beneish M-Score of Lexmark International Inc was -1.88. The lowest was -3.41. And the median was -2.70.
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 Lexmark International Inc 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 * 1.1199||+||0.528 * 0.9685||+||0.404 * 1.9655||+||0.892 * 0.9513||+||0.115 * 0.84|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2664||+||4.679 * -0.0772||-||0.327 * 1.1049|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $420 Mil.|
Revenue was 806.2 + 968.8 + 851.1 + 879.3 = $3,505 Mil.
Gross Profit was 306.4 + 385.2 + 319.6 + 362.1 = $1,373 Mil.
Total Current Assets was $983 Mil.
Total Assets was $3,831 Mil.
Property, Plant and Equipment(Net PPE) was $725 Mil.
Depreciation, Depletion and Amortization(DDA) was $309 Mil.
Selling, General & Admin. Expense(SGA) was $1,074 Mil.
Total Current Liabilities was $1,189 Mil.
Long-Term Debt was $992 Mil.
Net Income was -39.4 + -10.7 + -15.2 + -36.3 = $-102 Mil.
Non Operating Income was -0.4 + -0.2 + -3.4 + 0.6 = $-3 Mil.
Cash Flow from Operations was 79.1 + 103.1 + 21.9 + -6.7 = $197 Mil.
|Accounts Receivable was $395 Mil.
Revenue was 852 + 1022.9 + 918.1 + 891.8 = $3,685 Mil.
Gross Profit was 329.9 + 359.7 + 357.3 + 351.2 = $1,398 Mil.
Total Current Assets was $1,718 Mil.
Total Assets was $3,465 Mil.
Property, Plant and Equipment(Net PPE) was $771 Mil.
Depreciation, Depletion and Amortization(DDA) was $259 Mil.
Selling, General & Admin. Expense(SGA) was $891 Mil.
Total Current Liabilities was $1,086 Mil.
Long-Term Debt was $700 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)|
|=||(420.4 / 3505.4)||/||(394.6 / 3684.8)|
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)|
|=||(1398.1 / 3684.8)||/||(1373.3 / 3505.4)|
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 - (982.8 + 725.2) / 3830.8)||/||(1 - (1717.6 + 770.8) / 3465.4)|
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))|
|=||(258.6 / (258.6 + 770.8))||/||(309.4 / (309.4 + 725.2))|
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)|
|=||(1073.9 / 3505.4)||/||(891.4 / 3684.8)|
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)|
|=||((992 + 1188.9) / 3830.8)||/||((699.7 + 1085.8) / 3465.4)|
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|
|=||(-101.6 - -3.4||-||197.4)||/||3830.8|
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.
Lexmark International Inc has a M-score of -2.50 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
Lexmark International Inc Annual Data
Lexmark International Inc Quarterly Data