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GuruFocus has detected 9 Warning Signs with Microsoft Corp $MSFT.
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Microsoft Corp (NAS:MSFT)
Beneish M-Score
-2.86 (As of Today)

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.

Microsoft Corp has a M-score of -2.86 suggests that the company is not a manipulator.

MSFT' s Beneish M-Score Range Over the Past 10 Years
Min: -3.43   Max: -0.16
Current: -2.86

-3.43
-0.16

During the past 13 years, the highest Beneish M-Score of Microsoft Corp was -0.16. The lowest was -3.43. And the median was -2.69.


Definition

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 Microsoft 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 * 1.0163+0.528 * 1.0498+0.404 * 1.2804+0.892 * 0.9728+0.115 * 1.0517
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0081+4.679 * -0.0916-0.327 * 1.2519
=-2.86

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $14,343 Mil.
Revenue was 24090 + 20453 + 20614 + 20531 = $85,688 Mil.
Gross Profit was 14189 + 12609 + 12635 + 12809 = $52,242 Mil.
Total Current Assets was $144,949 Mil.
Total Assets was $224,610 Mil.
Property, Plant and Equipment(Net PPE) was $21,379 Mil.
Depreciation, Depletion and Amortization(DDA) was $7,599 Mil.
Selling, General & Admin. Expense(SGA) was $19,073 Mil.
Total Current Liabilities was $70,787 Mil.
Long-Term Debt was $59,306 Mil.
Net Income was 5200 + 4690 + 3122 + 3756 = $16,768 Mil.
Non Operating Income was 396 + 244 + 267 + -247 = $660 Mil.
Cash Flow from Operations was 6293 + 11549 + 8464 + 10367 = $36,673 Mil.
Accounts Receivable was $14,507 Mil.
Revenue was 23796 + 20379 + 22180 + 21729 = $88,084 Mil.
Gross Profit was 13924 + 13172 + 14712 + 14568 = $56,376 Mil.
Total Current Assets was $127,812 Mil.
Total Assets was $180,098 Mil.
Property, Plant and Equipment(Net PPE) was $15,789 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,013 Mil.
Selling, General & Admin. Expense(SGA) was $19,448 Mil.
Total Current Liabilities was $42,643 Mil.
Long-Term Debt was $40,679 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(14343 / 85688) / (14507 / 88084)
=0.16738633 / 0.16469506
=1.0163

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(56376 / 88084) / (52242 / 85688)
=0.64002543 / 0.60967697
=1.0498

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (144949 + 21379) / 224610) / (1 - (127812 + 15789) / 180098)
=0.25948088 / 0.20265078
=1.2804

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=85688 / 88084
=0.9728

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))
=(6013 / (6013 + 15789)) / (7599 / (7599 + 21379))
=0.27580039 / 0.26223342
=1.0517

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)
=(19073 / 85688) / (19448 / 88084)
=0.22258659 / 0.22078925
=1.0081

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)
=((59306 + 70787) / 224610) / ((40679 + 42643) / 180098)
=0.57919505 / 0.46264811
=1.2519

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(16768 - 660 - 36673) / 224610
=-0.0916

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.

Microsoft Corp has a M-score of -2.86 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Microsoft Corp Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 1.05421.01410.85161.08751.02880.99891.04941.00210.85021.1194
GMI 1.0460.97871.02030.9881.03131.01981.03261.07261.06371.0506
AQI 1.17141.08440.84490.97890.890.97660.94461.20380.80890.8699
SGI 1.15451.18190.96721.06931.11941.0541.0561.11541.07770.9117
DEPI 0.91991.00380.97650.9781.0250.95850.96670.95510.99331.0861
SGAI 0.94881.04620.95080.95560.93910.96251.04270.90530.92051.0394
LVGI 1.16611.09180.96250.91351.0370.9560.98121.09471.15481.1646
TATA -0.0854-0.063-0.0413-0.0643-0.0382-0.1215-0.0492-0.0592-0.1022-0.0849
M-score -2.65-2.61-2.87-2.62-2.55-2.98-2.63-2.55-3.11-2.92

Microsoft Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.02830.90390.80960.85020.89530.95091.07511.11941.03361.0163
GMI 1.0961.08381.07411.06371.03421.02711.03351.05061.06421.0498
AQI 1.14891.12261.09780.80890.80740.78950.81010.86990.79551.2804
SGI 1.13851.12011.13721.07770.99180.94250.91670.91170.94090.9728
DEPI 0.90050.88370.91020.99331.05571.10261.11951.08611.06931.0517
SGAI 0.90330.91460.93870.92050.94980.98180.9921.03941.02321.0081
LVGI 1.12151.05981.10721.15481.19961.23171.21091.16461.25341.2519
TATA -0.0663-0.068-0.0682-0.0987-0.0992-0.1064-0.1154-0.0839-0.0923-0.0916
M-score -2.56-2.70-2.81-3.09-3.16-3.21-3.14-2.92-3.06-2.86
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