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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 PMC-Sierra Inc was 1.42. The lowest was -6.23. And the median was -2.82.
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 * 1.0661||+||0.528 * 1.0036||+||0.404 * 1.0198||+||0.892 * 1.0245||+||0.115 * 1.0293|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9984||+||4.679 * -0.1056||-||0.327 * 1.0895|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $62.3 Mil.|
Revenue was 133.574 + 124.767 + 133.071 + 136.851 = $528.3 Mil.
Gross Profit was 95.575 + 86.333 + 93.091 + 96.149 = $371.1 Mil.
Total Current Assets was $229.0 Mil.
Total Assets was $821.5 Mil.
Property, Plant and Equipment(Net PPE) was $37.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $61.9 Mil.
Selling, General & Admin. Expense(SGA) was $118.0 Mil.
Total Current Liabilities was $130.3 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 6.718 + -8.579 + 4.655 + 2.33 = $5.1 Mil.
Non Operating Income was 2.261 + -1.154 + 2.365 + 2.533 = $6.0 Mil.
Cash Flow from Operations was 15.372 + 33.384 + 8.035 + 29.103 = $85.9 Mil.
|Accounts Receivable was $57.0 Mil.
Revenue was 135.462 + 126.822 + 126.468 + 126.872 = $515.6 Mil.
Gross Profit was 95.156 + 89.998 + 88.904 + 89.523 = $363.6 Mil.
Total Current Assets was $243.0 Mil.
Total Assets was $833.8 Mil.
Property, Plant and Equipment(Net PPE) was $38.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $68.4 Mil.
Selling, General & Admin. Expense(SGA) was $115.4 Mil.
Total Current Liabilities was $121.3 Mil.
Long-Term Debt was $0.0 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)|
|=||(62.269 / 528.263)||/||(57.013 / 515.624)|
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)|
|=||(86.333 / 515.624)||/||(95.575 / 528.263)|
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 - (228.97 + 37.871) / 821.504)||/||(1 - (243.014 + 38.73) / 833.805)|
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))|
|=||(68.44 / (68.44 + 38.73))||/||(61.904 / (61.904 + 37.871))|
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)|
|=||(118 / 528.263)||/||(115.364 / 515.624)|
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 + 130.252) / 821.504)||/||((0 + 121.339) / 833.805)|
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|
|=||(5.124 - 6.005||-||85.894)||/||821.504|
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 -2.91 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