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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 -3.10 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 -2.70.
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 * 0.9935||+||0.528 * 0.9963||+||0.404 * 1.0284||+||0.892 * 0.9719||+||0.115 * 0.9177|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0466||+||4.679 * -0.1399||-||0.327 * 0.7854|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $60.4 Mil.|
Revenue was 126.468 + 126.105 + 128.855 + 127.907 = $509.3 Mil.
Gross Profit was 88.904 + 89.173 + 91.661 + 90.08 = $359.8 Mil.
Total Current Assets was $209.6 Mil.
Total Assets was $770.6 Mil.
Property, Plant and Equipment(Net PPE) was $38.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $73.6 Mil.
Selling, General & Admin. Expense(SGA) was $113.8 Mil.
Total Current Liabilities was $105.7 Mil.
Long-Term Debt was $9.2 Mil.
Net Income was -4.241 + -16.447 + -2.724 + -4.152 = $-27.6 Mil.
Non Operating Income was 0.464 + 2.386 + -0.136 + 2.243 = $5.0 Mil.
Cash Flow from Operations was 10.609 + 35.688 + 5.804 + 23.202 = $75.3 Mil.
|Accounts Receivable was $62.6 Mil.
Revenue was 125.161 + 129.418 + 131.723 + 137.762 = $524.1 Mil.
Gross Profit was 87.774 + 91.824 + 92.733 + 96.509 = $368.8 Mil.
Total Current Assets was $261.6 Mil.
Total Assets was $892.6 Mil.
Property, Plant and Equipment(Net PPE) was $42.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $64.3 Mil.
Selling, General & Admin. Expense(SGA) was $111.9 Mil.
Total Current Liabilities was $154.4 Mil.
Long-Term Debt was $15.0 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)|
|=||(60.426 / 509.335)||/||(62.578 / 524.064)|
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)|
|=||(89.173 / 524.064)||/||(88.904 / 509.335)|
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 - (209.597 + 38.255) / 770.649)||/||(1 - (261.596 + 42.208) / 892.626)|
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))|
|=||(64.348 / (64.348 + 42.208))||/||(73.611 / (73.611 + 38.255))|
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)|
|=||(113.768 / 509.335)||/||(111.85 / 524.064)|
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)|
|=||((9.208 + 105.679) / 770.649)||/||((14.983 + 154.442) / 892.626)|
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|
|=||(-27.564 - 4.957||-||75.303)||/||770.649|
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 -3.10 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