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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 -3.21. 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 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|
|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
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)|
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)|
|=||(56376 / 88084)||/||(52242 / 85688)|
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 - (144949 + 21379) / 224610)||/||(1 - (127812 + 15789) / 180098)|
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))|
|=||(6013 / (6013 + 15789))||/||(7599 / (7599 + 21379))|
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)|
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)|
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|
|=||(16768 - 660||-||36673)||/||224610|
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.
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