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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.
Netflix Inc has a M-score of -2.22 suggests that the company is not a 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 -3.57.
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 * 0.8648||+||0.404 * 1.0559||+||0.892 * 1.2535||+||0.115 * 0.9956|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0304||+||4.679 * 0.0204||-||0.327 * 1.024|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 1409.432 + 1340.407 + 1270.089 + 1175.23 = $5,195 Mil.
Gross Profit was 455.038 + 425.559 + 400.903 + 388.5 = $1,670 Mil.
Total Current Assets was $3,823 Mil.
Total Assets was $6,778 Mil.
Property, Plant and Equipment(Net PPE) was $144 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,620 Mil.
Selling, General & Admin. Expense(SGA) was $806 Mil.
Total Current Liabilities was $2,549 Mil.
Long-Term Debt was $900 Mil.
Net Income was 59.295 + 71.018 + 53.115 + 48.421 = $232 Mil.
Non Operating Income was 0 + 0 + 0 + -3.002 = $-3 Mil.
Cash Flow from Operations was -37.439 + 56.024 + 36.359 + 41.445 = $96 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 1105.999 + 1069.372 + 1023.961 + 945.239 = $4,145 Mil.
Gross Profit was 307.099 + 308.698 + 287.009 + 249.372 = $1,152 Mil.
Total Current Assets was $2,849 Mil.
Total Assets was $4,901 Mil.
Property, Plant and Equipment(Net PPE) was $127 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,131 Mil.
Selling, General & Admin. Expense(SGA) was $624 Mil.
Total Current Liabilities was $1,935 Mil.
Long-Term Debt was $500 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 / 5195.158)||/||(0 / 4144.571)|
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)|
|=||(425.559 / 4144.571)||/||(455.038 / 5195.158)|
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 - (3823.482 + 144.147) / 6778.329)||/||(1 - (2849.278 + 127.263) / 4901.325)|
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))|
|=||(2130.82 / (2130.82 + 127.263))||/||(2620.23 / (2620.23 + 144.147))|
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)|
|=||(805.537 / 5195.158)||/||(623.701 / 4144.571)|
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)|
|=||((900 + 2548.655) / 6778.329)||/||((500 + 1935.136) / 4901.325)|
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|
|=||(231.849 - -3.002||-||96.389)||/||6778.329|
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 -2.22 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
Netflix Inc Annual Data
Netflix Inc Quarterly Data