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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 Mercury Systems Inc was -1.63. The lowest was -3.69. And the median was -2.62.
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 Mercury Systems 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 * 1.4084||+||0.528 * 0.9483||+||0.404 * 0.8871||+||0.892 * 1.0823||+||0.115 * 0.9594|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8361||+||4.679 * -0.0611||-||0.327 * 1.556|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $47.4 Mil.|
Revenue was 57.089 + 54.061 + 46.199 + 55.5 = $212.8 Mil.
Gross Profit was 27.035 + 23.999 + 22.094 + 25.127 = $98.3 Mil.
Total Current Assets was $179.0 Mil.
Total Assets was $385.4 Mil.
Property, Plant and Equipment(Net PPE) was $13.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $14.7 Mil.
Selling, General & Admin. Expense(SGA) was $48.8 Mil.
Total Current Liabilities was $39.5 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 0.265 + 0.499 + -7.546 + -0.578 = $-7.4 Mil.
Non Operating Income was 0.398 + -0.006 + 0.323 + 0.337 = $1.1 Mil.
Cash Flow from Operations was 8.228 + 2.178 + 2.509 + 2.201 = $15.1 Mil.
|Accounts Receivable was $31.1 Mil.
Revenue was 50.932 + 50.726 + 40.876 + 54.123 = $196.7 Mil.
Gross Profit was 24.325 + 21.562 + 17.622 + 22.574 = $86.1 Mil.
Total Current Assets was $144.5 Mil.
Total Assets was $369.7 Mil.
Property, Plant and Equipment(Net PPE) was $16.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $16.8 Mil.
Selling, General & Admin. Expense(SGA) was $53.9 Mil.
Total Current Liabilities was $24.3 Mil.
Long-Term Debt was $0.0 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)|
|=||(47.432 / 212.849)||/||(31.117 / 196.657)|
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)|
|=||(23.999 / 196.657)||/||(27.035 / 212.849)|
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 - (179.035 + 12.968) / 385.367)||/||(1 - (144.467 + 16.145) / 369.742)|
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))|
|=||(16.817 / (16.817 + 16.145))||/||(14.73 / (14.73 + 12.968))|
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)|
|=||(48.798 / 212.849)||/||(53.922 / 196.657)|
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 + 39.457) / 385.367)||/||((0 + 24.33) / 369.742)|
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|
|=||(-7.36 - 1.052||-||15.116)||/||385.367|
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.
Mercury Systems Inc has a M-score of -2.55 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
Mercury Systems Inc Annual Data
Mercury Systems Inc Quarterly Data