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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 3.98. The lowest was -3.86. And the median was -2.38.
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 * 1.0925||+||0.528 * 0.9861||+||0.404 * 1.5332||+||0.892 * 1||+||0.115 * 0.8514|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0414||+||4.679 * 0.0471||-||0.327 * 1.1925|
|This Year (Feb16) TTM:||Last Year (Feb15) TTM:|
|Accounts Receivable was $20.9 Mil.|
Revenue was 31.291 + 34.086 + 37.071 + 34.946 = $137.4 Mil.
Gross Profit was 9.75 + 10.435 + 11.262 + 10.218 = $41.7 Mil.
Total Current Assets was $133.2 Mil.
Total Assets was $164.0 Mil.
Property, Plant and Equipment(Net PPE) was $11.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.3 Mil.
Selling, General & Admin. Expense(SGA) was $50.8 Mil.
Total Current Liabilities was $20.8 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -2.926 + -2.286 + -1.399 + -2.221 = $-8.8 Mil.
Non Operating Income was -0.225 + 0.388 + -0.218 + -0.214 = $-0.3 Mil.
Cash Flow from Operations was -5.711 + -2.33 + -6.513 + -1.738 = $-16.3 Mil.
|Accounts Receivable was $19.1 Mil.
Revenue was 33.471 + 33.841 + 34.699 + 35.383 = $137.4 Mil.
Gross Profit was 9.8 + 10.462 + 10.658 + 10.164 = $41.1 Mil.
Total Current Assets was $160.0 Mil.
Total Assets was $183.1 Mil.
Property, Plant and Equipment(Net PPE) was $9.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.5 Mil.
Selling, General & Admin. Expense(SGA) was $48.8 Mil.
Total Current Liabilities was $19.5 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)|
|=||(20.881 / 137.394)||/||(19.113 / 137.394)|
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)|
|=||(10.435 / 137.394)||/||(9.75 / 137.394)|
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 - (133.169 + 11.624) / 163.992)||/||(1 - (159.963 + 9.145) / 183.088)|
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))|
|=||(1.525 / (1.525 + 9.145))||/||(2.345 / (2.345 + 11.624))|
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)|
|=||(50.801 / 137.394)||/||(48.783 / 137.394)|
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 + 20.785) / 163.992)||/||((0 + 19.46) / 183.088)|
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|
|=||(-8.832 - -0.269||-||-16.292)||/||163.992|
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 -2.05 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