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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.
PMC-Sierra Inc has a M-score of -3.03 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of PMC-Sierra Inc was 1.42. The lowest was -6.23. And the median was -2.74.
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 PMC-Sierra 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 * 0.9964||+||0.528 * 0.996||+||0.404 * 1.0777||+||0.892 * 0.989||+||0.115 * 0.9603|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0079||+||4.679 * -0.1407||-||0.327 * 0.6851|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $62.1 Mil.|
Revenue was 126.822 + 126.468 + 126.105 + 128.855 = $508.3 Mil.
Gross Profit was 89.998 + 88.904 + 89.173 + 91.661 = $359.7 Mil.
Total Current Assets was $224.2 Mil.
Total Assets was $781.5 Mil.
Property, Plant and Equipment(Net PPE) was $38.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $71.5 Mil.
Selling, General & Admin. Expense(SGA) was $112.5 Mil.
Total Current Liabilities was $106.0 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -3.48 + -4.241 + -16.447 + -2.724 = $-26.9 Mil.
Non Operating Income was -0.794 + 0.464 + 2.386 + -0.136 = $1.9 Mil.
Cash Flow from Operations was 28.407 + 10.609 + 35.688 + 6.436 = $81.1 Mil.
|Accounts Receivable was $63.0 Mil.
Revenue was 127.584 + 125.161 + 129.418 + 131.723 = $513.9 Mil.
Gross Profit was 89.947 + 87.774 + 91.824 + 92.733 = $362.3 Mil.
Total Current Assets was $304.9 Mil.
Total Assets was $896.9 Mil.
Property, Plant and Equipment(Net PPE) was $39.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $65.7 Mil.
Selling, General & Admin. Expense(SGA) was $112.8 Mil.
Total Current Liabilities was $165.7 Mil.
Long-Term Debt was $11.8 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)|
|=||(62.132 / 508.25)||/||(63.048 / 513.886)|
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)|
|=||(88.904 / 513.886)||/||(89.998 / 508.25)|
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 - (224.248 + 38.678) / 781.53)||/||(1 - (304.94 + 39.705) / 896.857)|
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))|
|=||(65.679 / (65.679 + 39.705))||/||(71.525 / (71.525 + 38.678))|
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)|
|=||(112.482 / 508.25)||/||(112.837 / 513.886)|
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 + 105.968) / 781.53)||/||((11.751 + 165.739) / 896.857)|
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|
|=||(-26.892 - 1.92||-||81.14)||/||781.53|
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.
PMC-Sierra Inc has a M-score of -3.03 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
PMC-Sierra Inc Annual Data
PMC-Sierra Inc Quarterly Data