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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 Netflix Inc was -1.82. The lowest was -6.57. And the median was -3.54.
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 Netflix 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||+||0.528 * 0.9179||+||0.404 * 0.9998||+||0.892 * 1.2569||+||0.115 * 0.9933|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.135||+||4.679 * 0.0416||-||0.327 * 1.119|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 1573.129 + 1484.728 + 1409.432 + 1340.407 = $5,808 Mil.
Gross Profit was 526.728 + 470.396 + 455.038 + 425.559 = $1,878 Mil.
Total Current Assets was $5,539 Mil.
Total Assets was $9,241 Mil.
Property, Plant and Equipment(Net PPE) was $146 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,938 Mil.
Selling, General & Admin. Expense(SGA) was $970 Mil.
Total Current Liabilities was $3,009 Mil.
Long-Term Debt was $2,400 Mil.
Net Income was 23.696 + 83.371 + 59.295 + 71.018 = $237 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -127.382 + -38.461 + -37.439 + 56.024 = $-147 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 1270.089 + 1175.23 + 1105.999 + 1069.372 = $4,621 Mil.
Gross Profit was 400.903 + 354.553 + 307.099 + 308.698 = $1,371 Mil.
Total Current Assets was $3,587 Mil.
Total Assets was $6,048 Mil.
Property, Plant and Equipment(Net PPE) was $133 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,355 Mil.
Selling, General & Admin. Expense(SGA) was $680 Mil.
Total Current Liabilities was $2,264 Mil.
Long-Term Debt was $900 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)|
|=||(0 / 5807.696)||/||(0 / 4620.69)|
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)|
|=||(470.396 / 4620.69)||/||(526.728 / 5807.696)|
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 - (5539.056 + 145.816) / 9240.626)||/||(1 - (3586.784 + 133.473) / 6048.106)|
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))|
|=||(2354.89 / (2354.89 + 133.473))||/||(2938.43 / (2938.43 + 145.816))|
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)|
|=||(970.095 / 5807.696)||/||(680.029 / 4620.69)|
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)|
|=||((2400 + 3008.849) / 9240.626)||/||((900 + 2263.653) / 6048.106)|
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|
|=||(237.38 - 0||-||-147.258)||/||9240.626|
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.
Netflix Inc has a M-score of -2.16 signals that the company is likely to 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
Netflix Inc Annual Data
Netflix Inc Quarterly Data