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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 11 years, the highest Beneish M-Score of NetSuite Inc was 1.11. The lowest was -3.48. And the median was -3.02.
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 * 1.1949||+||0.528 * 0.9878||+||0.404 * 1.2776||+||0.892 * 1.342||+||0.115 * 0.9349|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0136||+||4.679 * -0.1892||-||0.327 * 1.0261|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $139.2 Mil.|
Revenue was 157.869 + 143.66 + 131.794 + 122.961 = $556.3 Mil.
Gross Profit was 107.332 + 97.661 + 90.197 + 84.284 = $379.5 Mil.
Total Current Assets was $673.0 Mil.
Total Assets was $922.2 Mil.
Property, Plant and Equipment(Net PPE) was $58.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $30.1 Mil.
Selling, General & Admin. Expense(SGA) was $356.1 Mil.
Total Current Liabilities was $392.8 Mil.
Long-Term Debt was $271.6 Mil.
Net Income was -25.345 + -29.295 + -23.164 + -22.233 = $-100.0 Mil.
Non Operating Income was -0.01 + -0.132 + -0.199 + -0.11 = $-0.5 Mil.
Cash Flow from Operations was 20.948 + 16.256 + 18.581 + 19.135 = $74.9 Mil.
|Accounts Receivable was $86.8 Mil.
Revenue was 115.008 + 106.875 + 100.996 + 91.629 = $414.5 Mil.
Gross Profit was 78.057 + 71.683 + 67.59 + 61.984 = $279.3 Mil.
Total Current Assets was $599.2 Mil.
Total Assets was $772.4 Mil.
Property, Plant and Equipment(Net PPE) was $48.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $22.4 Mil.
Selling, General & Admin. Expense(SGA) was $261.8 Mil.
Total Current Liabilities was $279.6 Mil.
Long-Term Debt was $262.7 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)|
|=||(139.221 / 556.284)||/||(86.818 / 414.508)|
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)|
|=||(97.661 / 414.508)||/||(107.332 / 556.284)|
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 - (673.001 + 58.539) / 922.239)||/||(1 - (599.204 + 48.183) / 772.399)|
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))|
|=||(22.417 / (22.417 + 48.183))||/||(30.108 / (30.108 + 58.539))|
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)|
|=||(356.099 / 556.284)||/||(261.772 / 414.508)|
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)|
|=||((271.638 + 392.773) / 922.239)||/||((262.74 + 279.564) / 772.399)|
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|
|=||(-100.037 - -0.451||-||74.92)||/||922.239|
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 -2.79 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