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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 NetSuite Inc was 1.33. The lowest was -3.56. And the median was -3.03.
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 NetSuite 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 * 0.9748||+||0.528 * 1.0293||+||0.404 * 0.9303||+||0.892 * 1.3151||+||0.115 * 0.8888|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9562||+||4.679 * -0.2136||-||0.327 * 1.0553|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $177.1 Mil.|
Revenue was 230.771 + 216.578 + 206.229 + 192.823 = $846.4 Mil.
Gross Profit was 146.666 + 144.726 + 138.399 + 126.727 = $556.5 Mil.
Total Current Assets was $701.1 Mil.
Total Assets was $1,189.0 Mil.
Property, Plant and Equipment(Net PPE) was $95.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $56.9 Mil.
Selling, General & Admin. Expense(SGA) was $525.2 Mil.
Total Current Liabilities was $551.9 Mil.
Long-Term Debt was $283.1 Mil.
Net Income was -37.743 + -29.745 + -32.403 + -37.34 = $-137.2 Mil.
Non Operating Income was 0.307 + 0.158 + -0.003 + -0.214 = $0.2 Mil.
Cash Flow from Operations was 36.653 + 31.314 + 21.054 + 27.479 = $116.5 Mil.
|Accounts Receivable was $138.1 Mil.
Revenue was 177.28 + 164.817 + 157.869 + 143.66 = $643.6 Mil.
Gross Profit was 118.139 + 112.456 + 107.332 + 97.661 = $435.6 Mil.
Total Current Assets was $611.7 Mil.
Total Assets was $1,063.7 Mil.
Property, Plant and Equipment(Net PPE) was $74.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $37.0 Mil.
Selling, General & Admin. Expense(SGA) was $417.7 Mil.
Total Current Liabilities was $431.6 Mil.
Long-Term Debt was $276.2 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)|
|=||(177.088 / 846.401)||/||(138.147 / 643.626)|
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)|
|=||(435.588 / 643.626)||/||(556.518 / 846.401)|
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 - (701.082 + 95.563) / 1189.043)||/||(1 - (611.685 + 74.651) / 1063.684)|
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))|
|=||(37.026 / (37.026 + 74.651))||/||(56.86 / (56.86 + 95.563))|
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)|
|=||(525.228 / 846.401)||/||(417.686 / 643.626)|
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)|
|=||((283.067 + 551.922) / 1189.043)||/||((276.205 + 431.593) / 1063.684)|
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|
|=||(-137.231 - 0.248||-||116.5)||/||1189.043|
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.
NetSuite Inc has a M-score of -3.26 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
NetSuite Inc Annual Data
NetSuite Inc Quarterly Data