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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.
NetSuite, Inc. has a M-score of -3.02 suggests that the company is not a 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 -3.08.
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 * 0.9973||+||0.528 * 1.0248||+||0.404 * 1.0718||+||0.892 * 1.3422||+||0.115 * 1.147|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0118||+||4.679 * -0.1712||-||0.327 * 1.3069|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|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.
Net Income was -20.21 + -16.772 + -20.39 + -13.037 = $-70.4 Mil.
Non Operating Income was -0.132 + -0.069 + -0.039 + -0.143 = $-0.4 Mil.
Cash Flow from Operations was 17.338 + 14.636 + 15.561 + 14.7 = $62.2 Mil.
|Accounts Receivable was $64.9 Mil.
Revenue was 85.006 + 79.791 + 74.709 + 69.319 = $308.8 Mil.
Gross Profit was 58.383 + 54.7 + 51.655 + 48.524 = $213.3 Mil.
Total Current Assets was $286.7 Mil.
Total Assets was $369.8 Mil.
Property, Plant and Equipment(Net PPE) was $27.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $15.6 Mil.
Selling, General & Admin. Expense(SGA) was $192.8 Mil.
Total Current Liabilities was $198.3 Mil.
Long-Term Debt was $0.4 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)|
|=||(86.818 / 414.508)||/||(64.861 / 308.825)|
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)|
|=||(71.683 / 308.825)||/||(78.057 / 414.508)|
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 - (599.204 + 48.183) / 772.399)||/||(1 - (286.728 + 27.21) / 369.775)|
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))|
|=||(15.586 / (15.586 + 27.21))||/||(22.417 / (22.417 + 48.183))|
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)|
|=||(261.772 / 414.508)||/||(192.763 / 308.825)|
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)|
|=||((262.74 + 279.564) / 772.399)||/||((0.401 + 198.255) / 369.775)|
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|
|=||(-70.409 - -0.383||-||62.235)||/||772.399|
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 -3.02 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