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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 * 0.8286||+||0.528 * 1.0286||+||0.404 * 0.902||+||0.892 * 1.2955||+||0.115 * 0.9234|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9423||+||4.679 * -0.2316||-||0.327 * 1.0308|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $168.3 Mil.|
Revenue was 243.915 + 230.771 + 216.578 + 206.229 = $897.5 Mil.
Gross Profit was 155.423 + 146.666 + 144.726 + 138.399 = $585.2 Mil.
Total Current Assets was $736.3 Mil.
Total Assets was $1,232.5 Mil.
Property, Plant and Equipment(Net PPE) was $99.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $58.3 Mil.
Selling, General & Admin. Expense(SGA) was $545.5 Mil.
Total Current Liabilities was $581.8 Mil.
Long-Term Debt was $285.9 Mil.
Net Income was -34.144 + -37.743 + -29.745 + -32.403 = $-134.0 Mil.
Non Operating Income was -0.135 + 0.307 + 0.158 + -0.003 = $0.3 Mil.
Cash Flow from Operations was 62.022 + 36.653 + 31.314 + 21.054 = $151.0 Mil.
|Accounts Receivable was $156.8 Mil.
Revenue was 192.823 + 177.28 + 164.817 + 157.869 = $692.8 Mil.
Gross Profit was 126.727 + 118.139 + 112.456 + 107.332 = $464.7 Mil.
Total Current Assets was $620.6 Mil.
Total Assets was $1,093.3 Mil.
Property, Plant and Equipment(Net PPE) was $82.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $42.8 Mil.
Selling, General & Admin. Expense(SGA) was $446.9 Mil.
Total Current Liabilities was $468.1 Mil.
Long-Term Debt was $278.6 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)|
|=||(168.309 / 897.493)||/||(156.792 / 692.789)|
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)|
|=||(464.654 / 692.789)||/||(585.214 / 897.493)|
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 - (736.349 + 99.801) / 1232.476)||/||(1 - (620.622 + 82.893) / 1093.27)|
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))|
|=||(42.822 / (42.822 + 82.893))||/||(58.33 / (58.33 + 99.801))|
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)|
|=||(545.469 / 897.493)||/||(446.859 / 692.789)|
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)|
|=||((285.92 + 581.785) / 1232.476)||/||((278.598 + 468.118) / 1093.27)|
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|
|=||(-134.035 - 0.327||-||151.043)||/||1232.476|
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 -3.49 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