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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 12 years, the highest Beneish M-Score of NetSuite Inc was 1.33. The lowest was -3.56. And the median was -3.07.
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 * 1.1108||+||0.528 * 0.9926||+||0.404 * 1.2256||+||0.892 * 1.3416||+||0.115 * 0.9807|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0082||+||4.679 * -0.2||-||0.327 * 1.0469|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|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.
Net Income was -22.713 + -25.345 + -29.295 + -23.164 = $-100.5 Mil.
Non Operating Income was 0.002 + -0.01 + -0.132 + -0.199 = $-0.3 Mil.
Cash Flow from Operations was 27.967 + 20.948 + 16.256 + 18.581 = $83.8 Mil.
|Accounts Receivable was $82.1 Mil.
Revenue was 122.961 + 115.008 + 106.875 + 100.996 = $445.8 Mil.
Gross Profit was 84.284 + 78.057 + 71.683 + 67.59 = $301.6 Mil.
Total Current Assets was $610.1 Mil.
Total Assets was $787.2 Mil.
Property, Plant and Equipment(Net PPE) was $50.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $24.4 Mil.
Selling, General & Admin. Expense(SGA) was $281.0 Mil.
Total Current Liabilities was $289.2 Mil.
Long-Term Debt was $256.9 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)|
|=||(122.418 / 598.14)||/||(82.147 / 445.84)|
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)|
|=||(107.332 / 445.84)||/||(112.456 / 598.14)|
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 - (671.515 + 66.048) / 919.446)||/||(1 - (610.126 + 49.993) / 787.168)|
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))|
|=||(24.387 / (24.387 + 49.993))||/||(33.169 / (33.169 + 66.048))|
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)|
|=||(380.073 / 598.14)||/||(280.988 / 445.84)|
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)|
|=||((273.902 + 393.869) / 919.446)||/||((256.875 + 289.239) / 787.168)|
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|
|=||(-100.517 - -0.339||-||83.752)||/||919.446|
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 -2.94 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