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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 ON Semiconductor Corp was -2.33. The lowest was -3.80. And the median was -2.65.
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 ON Semiconductor Corp 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 * 0.9584||+||0.528 * 0.9731||+||0.404 * 1.3675||+||0.892 * 1.1362||+||0.115 * 0.9023|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0486||+||4.679 * -0.0751||-||0.327 * 1.1037|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $418 Mil.|
Revenue was 864.2 + 833.5 + 757.6 + 706.5 = $3,162 Mil.
Gross Profit was 277 + 284.1 + 273 + 250.8 = $1,085 Mil.
Total Current Assets was $1,806 Mil.
Total Assets was $3,823 Mil.
Property, Plant and Equipment(Net PPE) was $1,204 Mil.
Depreciation, Depletion and Amortization(DDA) was $269 Mil.
Selling, General & Admin. Expense(SGA) was $381 Mil.
Total Current Liabilities was $1,041 Mil.
Long-Term Debt was $983 Mil.
Net Income was 1.7 + 41.6 + 88 + 58.4 = $190 Mil.
Non Operating Income was -1.7 + -0.9 + -1.2 + -0.6 = $-4 Mil.
Cash Flow from Operations was 162.5 + 92.3 + 151.6 + 74.9 = $481 Mil.
|Accounts Receivable was $383 Mil.
Revenue was 718 + 715.4 + 688.3 + 661 = $2,783 Mil.
Gross Profit was 243.6 + 249.2 + 231.8 + 204.5 = $929 Mil.
Total Current Assets was $1,707 Mil.
Total Assets was $3,294 Mil.
Property, Plant and Equipment(Net PPE) was $1,074 Mil.
Depreciation, Depletion and Amortization(DDA) was $212 Mil.
Selling, General & Admin. Expense(SGA) was $320 Mil.
Total Current Liabilities was $819 Mil.
Long-Term Debt was $761 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)|
|=||(417.5 / 3161.8)||/||(383.4 / 2782.7)|
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)|
|=||(284.1 / 2782.7)||/||(277 / 3161.8)|
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 - (1805.8 + 1203.9) / 3823)||/||(1 - (1707.2 + 1074.2) / 3293.8)|
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))|
|=||(211.8 / (211.8 + 1074.2))||/||(268.8 / (268.8 + 1203.9))|
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)|
|=||(380.9 / 3161.8)||/||(319.7 / 2782.7)|
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)|
|=||((983 + 1040.8) / 3823)||/||((760.6 + 819.2) / 3293.8)|
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|
|=||(189.7 - -4.4||-||481.3)||/||3823|
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.
ON Semiconductor Corp has a M-score of -2.67 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
ON Semiconductor Corp Annual Data
ON Semiconductor Corp Quarterly Data