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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 * 0.7978||+||0.528 * 0.9414||+||0.404 * 1.3024||+||0.892 * 1.0179||+||0.115 * 0.9808|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0028||+||4.679 * -0.0678||-||0.327 * 1.031|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $396 Mil.|
Revenue was 918.1 + 891.8 + 877.7 + 1006.1 = $3,694 Mil.
Gross Profit was 357.3 + 351.2 + 341.6 + 417.8 = $1,468 Mil.
Total Current Assets was $1,729 Mil.
Total Assets was $3,542 Mil.
Property, Plant and Equipment(Net PPE) was $789 Mil.
Depreciation, Depletion and Amortization(DDA) was $262 Mil.
Selling, General & Admin. Expense(SGA) was $827 Mil.
Total Current Liabilities was $1,121 Mil.
Long-Term Debt was $700 Mil.
Net Income was 37.9 + 37.5 + 29.3 + 94 = $199 Mil.
Non Operating Income was -1 + 0.3 + -0.7 + -1.3 = $-3 Mil.
Cash Flow from Operations was 123.2 + 101.7 + 10 + 206.7 = $442 Mil.
|Accounts Receivable was $488 Mil.
Revenue was 890.5 + 886.7 + 884.3 + 967.4 = $3,629 Mil.
Gross Profit was 347.9 + 341.9 + 336.4 + 331.4 = $1,358 Mil.
Total Current Assets was $1,993 Mil.
Total Assets was $3,589 Mil.
Property, Plant and Equipment(Net PPE) was $799 Mil.
Depreciation, Depletion and Amortization(DDA) was $259 Mil.
Selling, General & Admin. Expense(SGA) was $810 Mil.
Total Current Liabilities was $1,090 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)|
|=||(396.3 / 3693.7)||/||(488 / 3628.9)|
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)|
|=||(351.2 / 3628.9)||/||(357.3 / 3693.7)|
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 - (1728.7 + 788.6) / 3541.9)||/||(1 - (1992.9 + 799) / 3589.1)|
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))|
|=||(259 / (259 + 799))||/||(262.3 / (262.3 + 788.6))|
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)|
|=||(827 / 3693.7)||/||(810.2 / 3628.9)|
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)|
|=||((699.7 + 1120.9) / 3541.9)||/||((699.6 + 1089.8) / 3589.1)|
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|
|=||(198.7 - -2.7||-||441.6)||/||3541.9|
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 -2.89 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