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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 48.41. The lowest was -3.92. And the median was -2.62.
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 * 0.892||+||0.528 * 0.9746||+||0.404 * 1.0154||+||0.892 * 1.0082||+||0.115 * 0.9735|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9333||+||4.679 * -0.1056||-||0.327 * 1.0416|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $374 Mil.|
Revenue was 486.115 + 504.119 + 477.939 + 475.059 = $1,943 Mil.
Gross Profit was 280.206 + 292.615 + 273.248 + 271.76 = $1,118 Mil.
Total Current Assets was $1,035 Mil.
Total Assets was $5,531 Mil.
Property, Plant and Equipment(Net PPE) was $187 Mil.
Depreciation, Depletion and Amortization(DDA) was $232 Mil.
Selling, General & Admin. Expense(SGA) was $572 Mil.
Total Current Liabilities was $603 Mil.
Long-Term Debt was $2,120 Mil.
Net Income was -12.065 + -11.027 + -39.39 + -14.098 = $-77 Mil.
Non Operating Income was -6.801 + -0.182 + -18.375 + -0.11 = $-25 Mil.
Cash Flow from Operations was 141.141 + 151.607 + 120.339 + 119.946 = $533 Mil.
|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.
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)|
|=||(374.333 / 1943.232)||/||(416.249 / 1927.49)|
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)|
|=||(292.615 / 1927.49)||/||(280.206 / 1943.232)|
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 - (1034.559 + 186.719) / 5530.628)||/||(1 - (1154.867 + 191.35) / 5786.178)|
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))|
|=||(223.84 / (223.84 + 191.35))||/||(231.747 / (231.747 + 186.719))|
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)|
|=||(571.766 / 1943.232)||/||(607.642 / 1927.49)|
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)|
|=||((2119.825 + 602.978) / 5530.628)||/||((2132.507 + 602.267) / 5786.178)|
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|
|=||(-76.58 - -25.468||-||533.033)||/||5530.628|
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 -3.08 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