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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.
Microsoft Corp has a M-score of -2.54 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Microsoft Corp was -2.06. The lowest was -3.10. And the median was -2.63.
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 * 1.0021||+||0.528 * 1.0726||+||0.404 * 1.2038||+||0.892 * 1.1154||+||0.115 * 0.9551|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9056||+||4.679 * -0.0576||-||0.327 * 1.0947|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $19,544 Mil.|
Revenue was 23382 + 20403 + 24519 + 18529 = $86,833 Mil.
Gross Profit was 15787 + 14462 + 16235 + 13415 = $59,899 Mil.
Total Current Assets was $114,246 Mil.
Total Assets was $172,384 Mil.
Property, Plant and Equipment(Net PPE) was $13,011 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,212 Mil.
Selling, General & Admin. Expense(SGA) was $20,632 Mil.
Total Current Liabilities was $45,625 Mil.
Long-Term Debt was $20,645 Mil.
Net Income was 4612 + 5660 + 6558 + 5244 = $22,074 Mil.
Non Operating Income was -1 + -62 + -175 + 13 = $-225 Mil.
Cash Flow from Operations was 9514 + 10099 + 4413 + 8205 = $32,231 Mil.
|Accounts Receivable was $17,486 Mil.
Revenue was 19896 + 20489 + 21456 + 16008 = $77,849 Mil.
Gross Profit was 14294 + 15702 + 15764 + 11840 = $57,600 Mil.
Total Current Assets was $101,466 Mil.
Total Assets was $142,431 Mil.
Property, Plant and Equipment(Net PPE) was $9,991 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,755 Mil.
Selling, General & Admin. Expense(SGA) was $20,425 Mil.
Total Current Liabilities was $37,417 Mil.
Long-Term Debt was $12,601 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)|
|=||(19544 / 86833)||/||(17486 / 77849)|
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)|
|=||(14462 / 77849)||/||(15787 / 86833)|
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 - (114246 + 13011) / 172384)||/||(1 - (101466 + 9991) / 142431)|
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))|
|=||(3755 / (3755 + 9991))||/||(5212 / (5212 + 13011))|
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)|
|=||(20632 / 86833)||/||(20425 / 77849)|
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)|
|=||((20645 + 45625) / 172384)||/||((12601 + 37417) / 142431)|
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|
|=||(22074 - -225||-||32231)||/||172384|
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 -2.54 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
Microsoft Corp Annual Data
Microsoft Corp Quarterly Data