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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 Richardson Electronics Ltd was 1.10. The lowest was -3.86. And the median was -2.31.
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 Richardson Electronics Ltd 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 * 1.1584||+||0.528 * 0.9514||+||0.404 * 1.5396||+||0.892 * 1.0369||+||0.115 * 0.9346|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0115||+||4.679 * 0.0419||-||0.327 * 1.0204|
|This Year (May16) TTM:||Last Year (May15) TTM:|
|Accounts Receivable was $24.9 Mil.|
Revenue was 39.568 + 31.291 + 34.086 + 37.071 = $142.0 Mil.
Gross Profit was 13.388 + 9.75 + 10.435 + 11.262 = $44.8 Mil.
Total Current Assets was $135.9 Mil.
Total Assets was $168.1 Mil.
Property, Plant and Equipment(Net PPE) was $13.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.4 Mil.
Selling, General & Admin. Expense(SGA) was $51.6 Mil.
Total Current Liabilities was $24.0 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -0.155 + -2.926 + -2.286 + -1.399 = $-6.8 Mil.
Non Operating Income was -0.174 + -0.225 + 0.388 + -0.218 = $-0.2 Mil.
Cash Flow from Operations was 0.97 + -5.711 + -2.33 + -6.513 = $-13.6 Mil.
|Accounts Receivable was $20.8 Mil.
Revenue was 34.946 + 33.471 + 33.841 + 34.699 = $137.0 Mil.
Gross Profit was 10.218 + 9.8 + 10.462 + 10.658 = $41.1 Mil.
Total Current Assets was $161.2 Mil.
Total Assets was $185.0 Mil.
Property, Plant and Equipment(Net PPE) was $10.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.7 Mil.
Selling, General & Admin. Expense(SGA) was $49.2 Mil.
Total Current Liabilities was $25.9 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)|
|=||(24.928 / 142.016)||/||(20.753 / 136.957)|
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)|
|=||(41.138 / 136.957)||/||(44.835 / 142.016)|
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 - (135.925 + 12.986) / 168.13)||/||(1 - (161.178 + 10.081) / 184.994)|
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))|
|=||(1.707 / (1.707 + 10.081))||/||(2.381 / (2.381 + 12.986))|
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)|
|=||(51.632 / 142.016)||/||(49.229 / 136.957)|
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 + 24.031) / 168.13)||/||((0 + 25.912) / 184.994)|
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|
|=||(-6.766 - -0.229||-||-13.584)||/||168.13|
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.
Richardson Electronics Ltd has a M-score of -1.93 signals that the company is likely to 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
Richardson Electronics Ltd Annual Data
Richardson Electronics Ltd Quarterly Data