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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 Microsoft Corp was -2.06. The lowest was -3.16. And the median was -2.65.
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 * 0.8953||+||0.528 * 1.0342||+||0.404 * 0.8074||+||0.892 * 0.9918||+||0.115 * 1.0557|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9498||+||4.679 * -0.1005||-||0.327 * 1.1996|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $11,444 Mil.|
Revenue was 20379 + 22180 + 21729 + 26470 = $90,758 Mil.
Gross Profit was 13172 + 14712 + 14568 + 16334 = $58,786 Mil.
Total Current Assets was $121,656 Mil.
Total Assets was $172,896 Mil.
Property, Plant and Equipment(Net PPE) was $15,046 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,990 Mil.
Selling, General & Admin. Expense(SGA) was $19,862 Mil.
Total Current Liabilities was $49,399 Mil.
Long-Term Debt was $27,819 Mil.
Net Income was 4620 + -3195 + 4985 + 5863 = $12,273 Mil.
Non Operating Income was -230 + 346 + -26 + 236 = $326 Mil.
Cash Flow from Operations was 8594 + 6816 + 9570 + 4340 = $29,320 Mil.
|Accounts Receivable was $12,887 Mil.
Revenue was 23201 + 23382 + 20403 + 24519 = $91,505 Mil.
Gross Profit was 14928 + 15749 + 14425 + 16197 = $61,299 Mil.
Total Current Assets was $112,439 Mil.
Total Assets was $169,656 Mil.
Property, Plant and Equipment(Net PPE) was $13,229 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,686 Mil.
Selling, General & Admin. Expense(SGA) was $21,084 Mil.
Total Current Liabilities was $44,694 Mil.
Long-Term Debt was $18,472 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)|
|=||(11444 / 90758)||/||(12887 / 91505)|
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)|
|=||(14712 / 91505)||/||(13172 / 90758)|
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 - (121656 + 15046) / 172896)||/||(1 - (112439 + 13229) / 169656)|
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))|
|=||(5686 / (5686 + 13229))||/||(5990 / (5990 + 15046))|
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)|
|=||(19862 / 90758)||/||(21084 / 91505)|
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)|
|=||((27819 + 49399) / 172896)||/||((18472 + 44694) / 169656)|
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|
|=||(12273 - 326||-||29320)||/||172896|
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 -3.16 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