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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 -2.52.
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 * 0.805||+||0.528 * 1.0198||+||0.404 * 1.7883||+||0.892 * 0.9899||+||0.115 * 0.919|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0337||+||4.679 * -0.1854||-||0.327 * 1.1737|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $78.4 Mil.|
Revenue was 127.166 + 122.205 + 127.912 + 117.032 = $494.3 Mil.
Gross Profit was 71.169 + 65.39 + 68.657 + 63.247 = $268.5 Mil.
Total Current Assets was $143.3 Mil.
Total Assets was $478.9 Mil.
Property, Plant and Equipment(Net PPE) was $26.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $38.1 Mil.
Selling, General & Admin. Expense(SGA) was $163.0 Mil.
Total Current Liabilities was $123.8 Mil.
Long-Term Debt was $48.0 Mil.
Net Income was 3.987 + -0.647 + -16.322 + 7.302 = $-5.7 Mil.
Non Operating Income was -0.055 + -0.087 + -0.019 + -0.043 = $-0.2 Mil.
Cash Flow from Operations was 43.452 + 12.933 + 13.504 + 13.406 = $83.3 Mil.
|Accounts Receivable was $98.4 Mil.
Revenue was 125.369 + 122.164 + 128.388 + 123.424 = $499.3 Mil.
Gross Profit was 68.771 + 66.187 + 72.547 + 69.064 = $276.6 Mil.
Total Current Assets was $255.9 Mil.
Total Assets was $436.1 Mil.
Property, Plant and Equipment(Net PPE) was $22.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $27.1 Mil.
Selling, General & Admin. Expense(SGA) was $159.3 Mil.
Total Current Liabilities was $133.3 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)|
|=||(78.406 / 494.315)||/||(98.393 / 499.345)|
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)|
|=||(276.569 / 499.345)||/||(268.463 / 494.315)|
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 - (143.258 + 25.985) / 478.888)||/||(1 - (255.907 + 22.537) / 436.142)|
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))|
|=||(27.119 / (27.119 + 22.537))||/||(38.063 / (38.063 + 25.985))|
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)|
|=||(163.038 / 494.315)||/||(159.328 / 499.345)|
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)|
|=||((48 + 123.844) / 478.888)||/||((0 + 133.345) / 436.142)|
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|
|=||(-5.68 - -0.204||-||83.295)||/||478.888|
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 -3.28 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