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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 Quality Systems Inc was -1.16. The lowest was -3.75. And the median was -2.53.
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 Quality Systems 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 * 0.7959||+||0.528 * 0.9954||+||0.404 * 1.7789||+||0.892 * 1.0247||+||0.115 * 0.867|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0003||+||4.679 * -0.2101||-||0.327 * 1.0207|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $75.5 Mil.|
Revenue was 127.868 + 127.166 + 122.205 + 127.912 = $505.2 Mil.
Gross Profit was 73.516 + 71.169 + 65.39 + 68.657 = $278.7 Mil.
Total Current Assets was $134.8 Mil.
Total Assets was $463.0 Mil.
Property, Plant and Equipment(Net PPE) was $26.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $41.5 Mil.
Selling, General & Admin. Expense(SGA) was $161.2 Mil.
Total Current Liabilities was $118.0 Mil.
Long-Term Debt was $25.0 Mil.
Net Income was 10.486 + 3.987 + -0.647 + -16.322 = $-2.5 Mil.
Non Operating Income was -0.004 + -0.055 + -0.087 + -0.019 = $-0.2 Mil.
Cash Flow from Operations was 25.038 + 43.452 + 12.933 + 13.504 = $94.9 Mil.
|Accounts Receivable was $92.6 Mil.
Revenue was 117.032 + 125.369 + 122.164 + 128.388 = $493.0 Mil.
Gross Profit was 63.247 + 68.771 + 66.187 + 72.547 = $270.8 Mil.
Total Current Assets was $251.3 Mil.
Total Assets was $433.4 Mil.
Property, Plant and Equipment(Net PPE) was $23.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $26.4 Mil.
Selling, General & Admin. Expense(SGA) was $157.2 Mil.
Total Current Liabilities was $131.1 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)|
|=||(75.516 / 505.151)||/||(92.592 / 492.953)|
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)|
|=||(270.752 / 492.953)||/||(278.732 / 505.151)|
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 - (134.834 + 26.097) / 463.019)||/||(1 - (251.269 + 23.171) / 433.39)|
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))|
|=||(26.358 / (26.358 + 23.171))||/||(41.473 / (41.473 + 26.097))|
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)|
|=||(161.185 / 505.151)||/||(157.241 / 492.953)|
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)|
|=||((25 + 117.952) / 463.019)||/||((0 + 131.095) / 433.39)|
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|
|=||(-2.496 - -0.165||-||94.927)||/||463.019|
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.
Quality Systems Inc has a M-score of -3.34 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
Quality Systems Inc Annual Data
Quality Systems Inc Quarterly Data