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Beneish M-Score -1.13 higher than -2.22, which implies that it might have manipulated its financial results.
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 -1.13. The lowest was -4.46. And the median was -2.73.
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 * 1.037||+||0.404 * 1.3423||+||0.892 * 1.2695||+||0.115 * 4.707|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9753||+||4.679 * 0.1073||-||0.327 * 0.9491|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 2290.188 + 2105.204 + 1957.736 + 1823.333 = $8,176 Mil.
Gross Profit was 757.344 + 632.106 + 588.196 + 573.968 = $2,552 Mil.
Total Current Assets was $5,194 Mil.
Total Assets was $12,347 Mil.
Property, Plant and Equipment(Net PPE) was $192 Mil.
Depreciation, Depletion and Amortization(DDA) was $59 Mil.
Selling, General & Admin. Expense(SGA) was $1,458 Mil.
Total Current Liabilities was $4,411 Mil.
Long-Term Debt was $2,374 Mil.
Net Income was 51.517 + 40.755 + 27.658 + 43.178 = $163 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -461.941 + -226.293 + -228.59 + -244.745 = $-1,162 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 1738.355 + 1644.694 + 1573.129 + 1484.728 = $6,441 Mil.
Gross Profit was 564.397 + 522.942 + 526.728 + 470.396 = $2,084 Mil.
Total Current Assets was $5,570 Mil.
Total Assets was $9,916 Mil.
Property, Plant and Equipment(Net PPE) was $181 Mil.
Depreciation, Depletion and Amortization(DDA) was $-1,916 Mil.
Selling, General & Admin. Expense(SGA) was $1,178 Mil.
Total Current Liabilities was $3,341 Mil.
Long-Term Debt was $2,400 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 / 8176.461)||/||(0 / 6440.906)|
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)|
|=||(2084.463 / 6440.906)||/||(2551.614 / 8176.461)|
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 - (5193.893 + 191.876) / 12347.338)||/||(1 - (5569.713 + 181.268) / 9916.267)|
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))|
|=||(-1916.132 / (-1916.132 + 181.268))||/||(58.827 / (58.827 + 191.876))|
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)|
|=||(1458.095 / 8176.461)||/||(1177.68 / 6440.906)|
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)|
|=||((2373.966 + 4411.405) / 12347.338)||/||((2400 + 3341.418) / 9916.267)|
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|
|=||(163.108 - 0||-||-1161.569)||/||12347.338|
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 -1.13 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