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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 -3.02.
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 * 1.0032||+||0.528 * 1.0235||+||0.404 * 1.705||+||0.892 * 1.3256||+||0.115 * 0.9418|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0046||+||4.679 * -0.2036||-||0.327 * 0.9687|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $162.8 Mil.|
Revenue was 216.578 + 206.229 + 192.823 + 177.28 = $792.9 Mil.
Gross Profit was 144.726 + 138.399 + 126.727 + 118.139 = $528.0 Mil.
Total Current Assets was $670.5 Mil.
Total Assets was $1,155.5 Mil.
Property, Plant and Equipment(Net PPE) was $95.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $52.4 Mil.
Selling, General & Admin. Expense(SGA) was $506.1 Mil.
Total Current Liabilities was $532.6 Mil.
Long-Term Debt was $280.3 Mil.
Net Income was -29.745 + -32.403 + -37.34 + -32.287 = $-131.8 Mil.
Non Operating Income was 0.158 + -0.003 + -0.214 + -0.266 = $-0.3 Mil.
Cash Flow from Operations was 31.314 + 21.054 + 27.479 + 23.907 = $103.8 Mil.
|Accounts Receivable was $122.4 Mil.
Revenue was 164.817 + 157.869 + 143.66 + 131.794 = $598.1 Mil.
Gross Profit was 112.456 + 107.332 + 97.661 + 90.197 = $407.6 Mil.
Total Current Assets was $671.5 Mil.
Total Assets was $919.4 Mil.
Property, Plant and Equipment(Net PPE) was $66.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $33.2 Mil.
Selling, General & Admin. Expense(SGA) was $380.1 Mil.
Total Current Liabilities was $393.9 Mil.
Long-Term Debt was $273.9 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)|
|=||(162.795 / 792.91)||/||(122.418 / 598.14)|
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)|
|=||(138.399 / 598.14)||/||(144.726 / 792.91)|
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 - (670.461 + 95.278) / 1155.463)||/||(1 - (671.515 + 66.048) / 919.446)|
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))|
|=||(33.169 / (33.169 + 66.048))||/||(52.433 / (52.433 + 95.278))|
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)|
|=||(506.14 / 792.91)||/||(380.073 / 598.14)|
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)|
|=||((280.312 + 532.635) / 1155.463)||/||((273.902 + 393.869) / 919.446)|
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|
|=||(-131.775 - -0.325||-||103.754)||/||1155.463|
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 -2.84 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