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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 1.11. The lowest was -6.10. And the median was -3.02.
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 * 1.1292||+||0.528 * 1.0202||+||0.404 * 1.0254||+||0.892 * 1.0765||+||0.115 * 1.3055|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0281||+||4.679 * -0.1458||-||0.327 * 0.9832|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $19 Mil.|
Revenue was 413.677 + 480.27 + 391.211 + 388.013 = $1,673 Mil.
Gross Profit was 77.307 + 83.109 + 72.451 + 73.657 = $307 Mil.
Total Current Assets was $197 Mil.
Total Assets was $392 Mil.
Property, Plant and Equipment(Net PPE) was $107 Mil.
Depreciation, Depletion and Amortization(DDA) was $27 Mil.
Selling, General & Admin. Expense(SGA) was $211 Mil.
Total Current Liabilities was $194 Mil.
Long-Term Debt was $27 Mil.
Net Income was 13.429 + 0.11 + -2.071 + 1.668 = $13 Mil.
Non Operating Income was 4.156 + 1.102 + 0.764 + 1.163 = $7 Mil.
Cash Flow from Operations was -34.503 + 90.916 + 11.467 + -4.778 = $63 Mil.
|Accounts Receivable was $16 Mil.
Revenue was 398.344 + 470.36 + 352.991 + 332.545 = $1,554 Mil.
Gross Profit was 75.437 + 85.38 + 67.058 + 62.625 = $291 Mil.
Total Current Assets was $195 Mil.
Total Assets was $320 Mil.
Property, Plant and Equipment(Net PPE) was $55 Mil.
Depreciation, Depletion and Amortization(DDA) was $20 Mil.
Selling, General & Admin. Expense(SGA) was $191 Mil.
Total Current Liabilities was $184 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)|
|=||(19.025 / 1673.171)||/||(15.651 / 1554.24)|
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)|
|=||(83.109 / 1554.24)||/||(77.307 / 1673.171)|
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 - (196.876 + 106.869) / 392.058)||/||(1 - (195.066 + 54.947) / 320.398)|
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))|
|=||(19.645 / (19.645 + 54.947))||/||(27.008 / (27.008 + 106.869))|
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)|
|=||(211.453 / 1673.171)||/||(191.056 / 1554.24)|
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)|
|=||((26.633 + 194.406) / 392.058)||/||((0 + 183.733) / 320.398)|
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|
|=||(13.136 - 7.185||-||63.102)||/||392.058|
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 -2.92 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