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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 -1.68. The lowest was -4.46. And the median was -2.96.
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 * 1.0446||+||0.404 * 1.2962||+||0.892 * 1.2475||+||0.115 * 1.0424|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9938||+||4.679 * 0.0894||-||0.327 * 0.952|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 2105.204 + 1957.736 + 1823.333 + 1738.355 = $7,625 Mil.
Gross Profit was 632.106 + 588.196 + 573.968 + 564.397 = $2,359 Mil.
Total Current Assets was $5,387 Mil.
Total Assets was $11,594 Mil.
Property, Plant and Equipment(Net PPE) was $163 Mil.
Depreciation, Depletion and Amortization(DDA) was $-1,554 Mil.
Selling, General & Admin. Expense(SGA) was $1,342 Mil.
Total Current Liabilities was $4,052 Mil.
Long-Term Debt was $2,373 Mil.
Net Income was 40.755 + 27.658 + 43.178 + 29.432 = $141 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -226.293 + -228.59 + -244.745 + -195.969 = $-896 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 1644.694 + 1573.129 + 1484.728 + 1409.432 = $6,112 Mil.
Gross Profit was 522.942 + 526.728 + 470.396 + 455.038 = $1,975 Mil.
Total Current Assets was $5,601 Mil.
Total Assets was $9,655 Mil.
Property, Plant and Equipment(Net PPE) was $171 Mil.
Depreciation, Depletion and Amortization(DDA) was $-1,213 Mil.
Selling, General & Admin. Expense(SGA) was $1,082 Mil.
Total Current Liabilities was $3,220 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 / 7624.628)||/||(0 / 6111.983)|
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)|
|=||(1975.104 / 6111.983)||/||(2358.667 / 7624.628)|
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 - (5386.918 + 162.864) / 11593.507)||/||(1 - (5600.51 + 171.396) / 9654.861)|
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))|
|=||(-1213.399 / (-1213.399 + 171.396))||/||(-1553.652 / (-1553.652 + 162.864))|
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)|
|=||(1341.88 / 7624.628)||/||(1082.364 / 6111.983)|
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)|
|=||((2373.085 + 4051.837) / 11593.507)||/||((2400 + 3220.069) / 9654.861)|
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|
|=||(141.023 - 0||-||-895.597)||/||11593.507|
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 -1.68 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