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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.
Nuance Communications, Inc. has a M-score of -2.77 suggests that the company is not a 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 * 0.9766||+||0.528 * 1.0917||+||0.404 * 1.0363||+||0.892 * 1.0627||+||0.115 * 0.9993|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.983||+||4.679 * -0.0819||-||0.327 * 1.0293|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|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 $598 Mil.
Total Current Liabilities was $836 Mil.
Long-Term Debt was $2,113 Mil.
Net Income was -55.413 + -32.32 + -34.974 + -25.848 = $-149 Mil.
Non Operating Income was -3.096 + -1.144 + -0.445 + -4.113 = $-9 Mil.
Cash Flow from Operations was 78.156 + 93.495 + 85.481 + 93.086 = $350 Mil.
|Accounts Receivable was $382 Mil.
Revenue was 462.268 + 468.781 + 431.744 + 390.341 = $1,753 Mil.
Gross Profit was 279.696 + 297.296 + 273.844 + 249.669 = $1,101 Mil.
Total Current Assets was $1,564 Mil.
Total Assets was $6,100 Mil.
Property, Plant and Equipment(Net PPE) was $129 Mil.
Depreciation, Depletion and Amortization(DDA) was $192 Mil.
Selling, General & Admin. Expense(SGA) was $573 Mil.
Total Current Liabilities was $589 Mil.
Long-Term Debt was $2,330 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)|
|=||(396.834 / 1862.991)||/||(382.4 / 1753.134)|
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)|
|=||(273.508 / 1753.134)||/||(262.16 / 1862.991)|
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 - (1360.675 + 142.971) / 5985.713)||/||(1 - (1563.674 + 128.73) / 6099.768)|
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))|
|=||(191.777 / (191.777 + 128.73))||/||(213.339 / (213.339 + 142.971))|
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)|
|=||(598.301 / 1862.991)||/||(572.73 / 1753.134)|
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)|
|=||((2112.759 + 835.869) / 5985.713)||/||((2330.078 + 589.276) / 6099.768)|
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|
|=||(-148.555 - -8.798||-||350.218)||/||5985.713|
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 -2.77 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