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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 NASDAQ OMX Group, Inc. was -0.66. The lowest was -9.15. And the median was -2.59.
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 NASDAQ OMX Group, 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 * 0.8211||+||0.528 * 1.0145||+||0.404 * 0.9939||+||0.892 * 0.9959||+||0.115 * 1.0413|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9959||+||4.679 * -0.0269||-||0.327 * 1.0084|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $323 Mil.|
Revenue was 807 + 858 + 920 + 818 = $3,403 Mil.
Gross Profit was 518 + 507 + 518 + 497 = $2,040 Mil.
Total Current Assets was $3,446 Mil.
Total Assets was $12,104 Mil.
Property, Plant and Equipment(Net PPE) was $295 Mil.
Depreciation, Depletion and Amortization(DDA) was $135 Mil.
Selling, General & Admin. Expense(SGA) was $1,086 Mil.
Total Current Liabilities was $3,146 Mil.
Long-Term Debt was $2,281 Mil.
Net Income was 133 + 9 + 86 + 123 = $351 Mil.
Non Operating Income was 1 + 14 + -49 + 0 = $-34 Mil.
Cash Flow from Operations was 175 + 231 + 280 + 24 = $710 Mil.
|Accounts Receivable was $395 Mil.
Revenue was 865 + 898 + 849 + 805 = $3,417 Mil.
Gross Profit was 523 + 529 + 520 + 506 = $2,078 Mil.
Total Current Assets was $3,718 Mil.
Total Assets was $13,116 Mil.
Property, Plant and Equipment(Net PPE) was $280 Mil.
Depreciation, Depletion and Amortization(DDA) was $136 Mil.
Selling, General & Admin. Expense(SGA) was $1,095 Mil.
Total Current Liabilities was $3,424 Mil.
Long-Term Debt was $2,408 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)|
|=||(323 / 3403)||/||(395 / 3417)|
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)|
|=||(507 / 3417)||/||(518 / 3403)|
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 - (3446 + 295) / 12104)||/||(1 - (3718 + 280) / 13116)|
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))|
|=||(136 / (136 + 280))||/||(135 / (135 + 295))|
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)|
|=||(1086 / 3403)||/||(1095 / 3417)|
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)|
|=||((2281 + 3146) / 12104)||/||((2408 + 3424) / 13116)|
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|
|=||(351 - -34||-||710)||/||12104|
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.
NASDAQ OMX Group, Inc. has a M-score of -2.77 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
NASDAQ OMX Group, Inc. Annual Data
NASDAQ OMX Group, Inc. Quarterly Data