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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 Nuance Communications Inc was 74.31. The lowest was -5.07. And the median was -2.58.
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 Nuance Communications 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 * 1.0138||+||0.528 * 1.0256||+||0.404 * 1.0248||+||0.892 * 1.0346||+||0.115 * 1.1106|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9769||+||4.679 * -0.0899||-||0.327 * 0.9595|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $416 Mil.|
Revenue was 474.019 + 502.314 + 475.504 + 475.653 = $1,927 Mil.
Gross Profit was 263.634 + 292.251 + 259.411 + 265.289 = $1,081 Mil.
Total Current Assets was $1,155 Mil.
Total Assets was $5,786 Mil.
Property, Plant and Equipment(Net PPE) was $191 Mil.
Depreciation, Depletion and Amortization(DDA) was $224 Mil.
Selling, General & Admin. Expense(SGA) was $608 Mil.
Total Current Liabilities was $602 Mil.
Long-Term Debt was $2,133 Mil.
Net Income was -50.495 + -1.456 + -54.247 + -39.227 = $-145 Mil.
Non Operating Income was -0.785 + -0.32 + 0.363 + -0.274 = $-1 Mil.
Cash Flow from Operations was 95.685 + 95.934 + 97.031 + 87.026 = $376 Mil.
|Accounts Receivable was $397 Mil.
Revenue was 469.98 + 472.243 + 469.769 + 450.999 = $1,863 Mil.
Gross Profit was 262.16 + 273.508 + 275.711 + 259.814 = $1,071 Mil.
Total Current Assets was $1,361 Mil.
Total Assets was $5,986 Mil.
Property, Plant and Equipment(Net PPE) was $143 Mil.
Depreciation, Depletion and Amortization(DDA) was $213 Mil.
Selling, General & Admin. Expense(SGA) was $601 Mil.
Total Current Liabilities was $836 Mil.
Long-Term Debt was $2,113 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)|
|=||(416.249 / 1927.49)||/||(396.834 / 1862.991)|
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)|
|=||(292.251 / 1862.991)||/||(263.634 / 1927.49)|
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 - (1154.867 + 191.35) / 5786.178)||/||(1 - (1360.675 + 142.971) / 5985.713)|
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))|
|=||(213.339 / (213.339 + 142.971))||/||(223.84 / (223.84 + 191.35))|
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)|
|=||(607.642 / 1927.49)||/||(601.173 / 1862.991)|
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)|
|=||((2132.507 + 602.267) / 5786.178)||/||((2112.759 + 835.869) / 5985.713)|
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|
|=||(-145.425 - -1.016||-||375.676)||/||5786.178|
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.
Nuance Communications Inc has a M-score of -2.80 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
Nuance Communications Inc Annual Data
Nuance Communications Inc Quarterly Data