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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 -1.69. The lowest was -3.44. 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 * 0.8693||+||0.528 * 1.0053||+||0.404 * 1.5158||+||0.892 * 1.0046||+||0.115 * 1.0913|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9832||+||4.679 * -0.0659||-||0.327 * 1.3598|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $94.0 Mil.|
Revenue was 127.912 + 117.032 + 125.369 + 122.164 = $492.5 Mil.
Gross Profit was 68.657 + 63.247 + 68.771 + 66.187 = $266.9 Mil.
Total Current Assets was $184.0 Mil.
Total Assets was $530.8 Mil.
Property, Plant and Equipment(Net PPE) was $25.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $29.7 Mil.
Selling, General & Admin. Expense(SGA) was $156.2 Mil.
Total Current Liabilities was $138.1 Mil.
Long-Term Debt was $105.0 Mil.
Net Income was -16.322 + 7.302 + 8.315 + 6.362 = $5.7 Mil.
Non Operating Income was -0.019 + -0.043 + -0.054 + -0.05 = $-0.2 Mil.
Cash Flow from Operations was 13.504 + 13.406 + 10.179 + 3.707 = $40.8 Mil.
|Accounts Receivable was $107.7 Mil.
Revenue was 128.388 + 123.424 + 120.519 + 117.894 = $490.2 Mil.
Gross Profit was 72.547 + 69.064 + 63.746 + 61.704 = $267.1 Mil.
Total Current Assets was $256.0 Mil.
Total Assets was $460.5 Mil.
Property, Plant and Equipment(Net PPE) was $20.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $29.3 Mil.
Selling, General & Admin. Expense(SGA) was $158.2 Mil.
Total Current Liabilities was $155.1 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)|
|=||(94.024 / 492.477)||/||(107.669 / 490.225)|
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)|
|=||(63.247 / 490.225)||/||(68.657 / 492.477)|
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 - (183.991 + 25.79) / 530.79)||/||(1 - (255.977 + 20.807) / 460.521)|
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))|
|=||(29.267 / (29.267 + 20.807))||/||(29.739 / (29.739 + 25.79))|
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)|
|=||(156.234 / 492.477)||/||(158.172 / 490.225)|
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)|
|=||((105 + 138.06) / 530.79)||/||((0 + 155.084) / 460.521)|
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|
|=||(5.657 - -0.166||-||40.796)||/||530.79|
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 -2.80 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