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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 Overstock.com Inc was 0.17. The lowest was -4.56. And the median was -3.35.
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 Overstock.com 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 * 0.9443||+||0.528 * 1.0187||+||0.404 * 0.8049||+||0.892 * 1.1479||+||0.115 * 1.3516|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9882||+||4.679 * -0.1941||-||0.327 * 1.0505|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $11 Mil.|
Revenue was 470.36 + 352.991 + 332.545 + 341.207 = $1,497 Mil.
Gross Profit was 85.38 + 67.058 + 62.625 + 63.996 = $279 Mil.
Total Current Assets was $258 Mil.
Total Assets was $377 Mil.
Property, Plant and Equipment(Net PPE) was $52 Mil.
Depreciation, Depletion and Amortization(DDA) was $18 Mil.
Selling, General & Admin. Expense(SGA) was $181 Mil.
Total Current Liabilities was $243 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1.358 + 1.617 + 1.909 + 3.97 = $9 Mil.
Non Operating Income was 0.536 + -0.35 + 0.524 + 0.459 = $1 Mil.
Cash Flow from Operations was 81.33 + 28.803 + 0.38 + -29.679 = $81 Mil.
|Accounts Receivable was $10 Mil.
Revenue was 397.593 + 301.426 + 293.204 + 311.994 = $1,304 Mil.
Gross Profit was 71.735 + 59.15 + 57.839 + 58.936 = $248 Mil.
Total Current Assets was $219 Mil.
Total Assets was $316 Mil.
Property, Plant and Equipment(Net PPE) was $27 Mil.
Depreciation, Depletion and Amortization(DDA) was $15 Mil.
Selling, General & Admin. Expense(SGA) was $160 Mil.
Total Current Liabilities was $194 Mil.
Long-Term Debt was $0 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)|
|=||(10.781 / 1497.103)||/||(9.946 / 1304.217)|
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)|
|=||(67.058 / 1304.217)||/||(85.38 / 1497.103)|
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 - (258.062 + 52.071) / 376.865)||/||(1 - (219.007 + 27.194) / 315.636)|
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))|
|=||(14.522 / (14.522 + 27.194))||/||(18.064 / (18.064 + 52.071))|
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)|
|=||(181.238 / 1497.103)||/||(159.778 / 1304.217)|
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)|
|=||((0 + 242.802) / 376.865)||/||((0 + 193.582) / 315.636)|
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|
|=||(8.854 - 1.169||-||80.834)||/||376.865|
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.
Overstock.com Inc has a M-score of -3.35 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
Overstock.com Inc Annual Data
Overstock.com Inc Quarterly Data