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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 -1.01. 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 * 0.9081||+||0.528 * 0.9993||+||0.404 * 0.9551||+||0.892 * 1.09||+||0.115 * 0.9796|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9523||+||4.679 * -0.0186||-||0.327 * 1.022|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $389 Mil.|
Revenue was 920 + 818 + 865 + 898 = $3,501 Mil.
Gross Profit was 518 + 497 + 523 + 529 = $2,067 Mil.
Total Current Assets was $3,400 Mil.
Total Assets was $12,087 Mil.
Property, Plant and Equipment(Net PPE) was $292 Mil.
Depreciation, Depletion and Amortization(DDA) was $137 Mil.
Selling, General & Admin. Expense(SGA) was $1,093 Mil.
Total Current Liabilities was $2,980 Mil.
Long-Term Debt was $2,313 Mil.
Net Income was 86 + 123 + 101 + 103 = $413 Mil.
Non Operating Income was -49 + 0 + 0 + 0 = $-49 Mil.
Cash Flow from Operations was 280 + 24 + 200 + 183 = $687 Mil.
|Accounts Receivable was $393 Mil.
Revenue was 849 + 805 + 814 + 744 = $3,212 Mil.
Gross Profit was 520 + 506 + 451 + 418 = $1,895 Mil.
Total Current Assets was $3,163 Mil.
Total Assets was $12,577 Mil.
Property, Plant and Equipment(Net PPE) was $268 Mil.
Depreciation, Depletion and Amortization(DDA) was $122 Mil.
Selling, General & Admin. Expense(SGA) was $1,053 Mil.
Total Current Liabilities was $2,800 Mil.
Long-Term Debt was $2,589 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)|
|=||(389 / 3501)||/||(393 / 3212)|
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)|
|=||(497 / 3212)||/||(518 / 3501)|
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 - (3400 + 292) / 12087)||/||(1 - (3163 + 268) / 12577)|
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))|
|=||(122 / (122 + 268))||/||(137 / (137 + 292))|
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)|
|=||(1093 / 3501)||/||(1053 / 3212)|
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)|
|=||((2313 + 2980) / 12087)||/||((2589 + 2800) / 12577)|
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|
|=||(413 - -49||-||687)||/||12087|
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 -2.59 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