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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 * 1.1419||+||0.528 * 1.0448||+||0.404 * 1.8406||+||0.892 * 0.9761||+||0.115 * 0.8962|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2437||+||4.679 * -0.0613||-||0.327 * 1.0943|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $442 Mil.|
Revenue was 851.1 + 879.3 + 852 + 1022.9 = $3,605 Mil.
Gross Profit was 319.6 + 362.1 + 329.9 + 359.7 = $1,371 Mil.
Total Current Assets was $1,120 Mil.
Total Assets was $3,983 Mil.
Property, Plant and Equipment(Net PPE) was $742 Mil.
Depreciation, Depletion and Amortization(DDA) was $286 Mil.
Selling, General & Admin. Expense(SGA) was $1,004 Mil.
Total Current Liabilities was $1,144 Mil.
Long-Term Debt was $1,097 Mil.
Net Income was -15.2 + -36.3 + 19.7 + -23.4 = $-55 Mil.
Non Operating Income was -3.4 + 0.6 + 0.8 + -2 = $-4 Mil.
Cash Flow from Operations was 21.9 + -6.7 + -10.5 + 188.1 = $193 Mil.
|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.
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)|
|=||(441.7 / 3605.3)||/||(396.3 / 3693.7)|
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)|
|=||(362.1 / 3693.7)||/||(319.6 / 3605.3)|
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 - (1120.3 + 742) / 3983.1)||/||(1 - (1728.7 + 788.6) / 3541.9)|
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))|
|=||(262.3 / (262.3 + 788.6))||/||(286.4 / (286.4 + 742))|
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)|
|=||(1003.9 / 3605.3)||/||(827 / 3693.7)|
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)|
|=||((1096.8 + 1143.6) / 3983.1)||/||((699.7 + 1120.9) / 3541.9)|
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|
|=||(-55.2 - -4||-||192.8)||/||3983.1|
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 -2.38 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