Telefonaktiebolaget L M Ericsson (Telefonaktiebolaget L M Ericsson) Beneish M-Score

: -2.63 (As of Today)

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The zones of discrimination for M-Score is as such:

An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator.
An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.

Good Sign:

Beneish M-Score -2.63 no higher than -1.78, which implies that the company is unlikely to be a manipulator.

The historical rank and industry rank for Telefonaktiebolaget L M Ericsson's Beneish M-Score or its related term are showing as below:

ERIC' s Beneish M-Score Range Over the Past 10 Years
Min: -2.93 Med: -2.68 Max: -2.47
Current: -2.63

During the past 13 years, the highest Beneish M-Score of Telefonaktiebolaget L M Ericsson was -2.47. The lowest was -2.93. And the median was -2.68.

Telefonaktiebolaget L M Ericsson Beneish M-Score Historical Data

The historical data trend for Telefonaktiebolaget L M Ericsson's Beneish M-Score can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Telefonaktiebolaget L M Ericsson Annual Data

Trend

Dec14

Dec15

Dec16

Dec17

Dec18

Dec19

Dec20

Dec21

Dec22

Dec23

Beneish M-Score

-2.93

-2.73

-2.74

-2.47

-2.63

Telefonaktiebolaget L M Ericsson Quarterly Data
	Mar19	Jun19	Sep19	Dec19	Mar20	Jun20	Sep20	Dec20	Mar21	Jun21	Sep21	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23
Beneish M-Score																-2.47	-2.33	-2.19	-3.23	-2.63

Competitive Comparison

For the Communication Equipment subindustry, Telefonaktiebolaget L M Ericsson's Beneish M-Score, along with its competitors' market caps and Beneish M-Score data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

Telefonaktiebolaget L M Ericsson Beneish M-Score Distribution

For the Hardware industry and Technology sector, Telefonaktiebolaget L M Ericsson's Beneish M-Score distribution charts can be found below:

* The bar in red indicates where Telefonaktiebolaget L M Ericsson's Beneish M-Score falls into.

Telefonaktiebolaget L M Ericsson Beneish M-Score Calculation

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski 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 Telefonaktiebolaget L M Ericsson for today is based on a combination of the following eight different indices:

-4.84

0.92 * DSRI

0.528 * GMI

0.404 * AQI

0.892 * SGI

0.115 * DEPI

-4.84

0.92 * 0.9649

0.528 * 1.0814

0.404 * 0.9462

0.892 * 0.935

0.115 * 1.0203

0.172 * SGAI

4.679 * TATA

0.327 * LVGI

0.172 * 1.1356

4.679 * 0.005817

0.327 * 1.0748

-2.57

This Year (Dec23) TTM:

Last Year (Dec22) TTM:

Total Receivables was $6,243 Mil.
Revenue was 7007.585 + 5816.343 + 5984.158 + 5970.906 = $24,779 Mil.
Gross Profit was 2788.664 + 2230.803 + 2237.977 + 2306.921 = $9,564 Mil.
Total Current Assets was $15,110 Mil.
Total Assets was $28,958 Mil.
Property, Plant and Equipment(Net PPE) was $1,805 Mil.
Depreciation, Depletion and Amortization(DDA) was $814 Mil.
Selling, General, & Admin. Expense(SGA) was $3,689 Mil.
Total Current Liabilities was $12,615 Mil.
Long-Term Debt & Capital Lease Obligation was $3,357 Mil.
Net Income was 330.877 + -2766.852 + -63.701 + 144.708 = $-2,355 Mil.
Non Operating Income was -3120.321 + -23.185 + -34.636 + -59.945 = $-3,238 Mil.
Cash Flow from Operations was 1411.831 + 126.48 + -267.618 + -556.017 = $715 Mil.

Total Receivables was $6,920 Mil.
Revenue was 8284.833 + 6236.423 + 6224.776 + 5756.388 = $26,502 Mil.
Gross Profit was 3427.346 + 2578.803 + 2621.053 + 2434.764 = $11,062 Mil.
Total Current Assets was $16,747 Mil.
Total Assets was $33,681 Mil.
Property, Plant and Equipment(Net PPE) was $2,130 Mil.
Depreciation, Depletion and Amortization(DDA) was $990 Mil.
Selling, General, & Admin. Expense(SGA) was $3,475 Mil.
Total Current Liabilities was $14,032 Mil.
Long-Term Debt & Capital Lease Obligation was $3,253 Mil.

1. DSRI = Days Sales in Receivables Index

Measured as the ratio of Revenue in Total Receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI	=	(Receivables_t / Revenue_t)	/	(Receivables_t-1 / Revenue_t-1)
	=	(6243.176 / 24778.992)	/	(6920.119 / 26502.42)
	=	0.251954	/	0.261113
	=	0.9649

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.

GMI	=	GrossMargin_t-1	/	GrossMargin_t
	=	(GrossProfit_t-1 / Revenue_t-1)	/	(GrossProfit_t / Revenue_t)
	=	(11061.966 / 26502.42)	/	(9564.365 / 24778.992)
	=	0.417395	/	0.385987
	=	1.0814

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than Property, Plant and Equipment to Total Assets.

AQI	=	(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)	/	(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
	=	(1 - (15109.577 + 1805.003) / 28957.651)	/	(1 - (16747.254 + 2130.083) / 33680.574)
	=	0.415886	/	0.439519
	=	0.9462

4. SGI = Sales Growth Index

Ratio of Revenue 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.

SGI	=	Sales_t	/	Sales_t-1
	=	Revenue_t	/	Revenue_t-1
	=	24778.992	/	26502.42
	=	0.935

5. DEPI = Depreciation Index

Measured as the ratio of the rate of Depreciation, Depletion and Amortization 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))
	=	(989.761 / (989.761 + 2130.083))	/	(814.456 / (814.456 + 1805.003))
	=	0.317247	/	0.310925
	=	1.0203

Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.

6. SGAI = Sales, General and Administrative expenses Index

The ratio of Selling, General, & Admin. Expense(SGA) to Sales 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)
	=	(3689.116 / 24778.992)	/	(3474.707 / 26502.42)
	=	0.148881	/	0.131109
	=	1.1356

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 in leverage

LVGI	=	((LTD_t + CurrentLiabilities_t) / TotalAssets_t)	/	((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
	=	((3357.316 + 12614.939) / 28957.651)	/	((3253.421 + 14031.605) / 33680.574)
	=	0.551573	/	0.513205
	=	1.0748

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA	=	(IncomefromContinuingOperations_t	-	CashFlowsfromOperations_t)	/	TotalAssets_t
	=	(NetIncome_t - NonOperatingIncome_t	-	CashFlowsfromOperations_t)	/	TotalAssets_t
	=	(-2354.968 - -3238.087	-	714.676)	/	28957.651
	=	0.005817

An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.

Telefonaktiebolaget L M Ericsson has a M-score of -2.57 suggests that the company is unlikely to be a manipulator.

Telefonaktiebolaget L M Ericsson Beneish M-Score Related Terms

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Telefonaktiebolaget L M Ericsson (Telefonaktiebolaget L M Ericsson) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Hardware » Telefonaktiebolaget L M Ericsson (NAS:ERIC) » Definitions » Beneish M-Score

Comparable Companies

Address

Torshamnsgatan 21, Kista, Stockholm, SWE, SE-164 83

Website

https://www.ericsson.com

Ericsson provides telecom equipment and services that are primarily used to build and facilitate mobile networks through operations in three segments: networks, cloud and software services, and enterprises. The firm's customers have historically been primarily wireless carriers, but the firm is making a push to cater more to other enterprises as well, both as they try to take advantage of 5G capabilities and on other "as-a-service" communications platforms. The company also licenses its patents to handset manufacturers so their devices are compatible with wireless networks.