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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 * 0.9047||+||0.528 * 0.9458||+||0.404 * 0.6797||+||0.892 * 0.9927||+||0.115 * 0.9412|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0349||+||4.679 * 0.0051||-||0.327 * 0.9568|
|This Year (Aug16) TTM:||Last Year (Aug15) TTM:|
|Accounts Receivable was $21.5 Mil.|
Revenue was 33.373 + 39.568 + 31.291 + 34.086 = $138.3 Mil.
Gross Profit was 10.24 + 13.388 + 9.75 + 10.435 = $43.8 Mil.
Total Current Assets was $132.4 Mil.
Total Assets was $160.6 Mil.
Property, Plant and Equipment(Net PPE) was $14.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.6 Mil.
Selling, General & Admin. Expense(SGA) was $51.7 Mil.
Total Current Liabilities was $20.6 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -2.85 + -0.155 + -2.926 + -2.286 = $-8.2 Mil.
Non Operating Income was -0.277 + -0.174 + -0.225 + 0.388 = $-0.3 Mil.
Cash Flow from Operations was -1.675 + 0.97 + -5.711 + -2.33 = $-8.7 Mil.
|Accounts Receivable was $24.0 Mil.
Revenue was 37.071 + 34.946 + 33.471 + 33.841 = $139.3 Mil.
Gross Profit was 11.262 + 10.218 + 9.8 + 10.462 = $41.7 Mil.
Total Current Assets was $143.4 Mil.
Total Assets was $176.5 Mil.
Property, Plant and Equipment(Net PPE) was $10.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.8 Mil.
Selling, General & Admin. Expense(SGA) was $50.3 Mil.
Total Current Liabilities was $23.6 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)|
|=||(21.545 / 138.318)||/||(23.989 / 139.329)|
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)|
|=||(41.742 / 139.329)||/||(43.813 / 138.318)|
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 - (132.386 + 14.425) / 160.571)||/||(1 - (143.397 + 10.832) / 176.477)|
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))|
|=||(1.826 / (1.826 + 10.832))||/||(2.611 / (2.611 + 14.425))|
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)|
|=||(51.692 / 138.318)||/||(50.314 / 139.329)|
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 + 20.581) / 160.571)||/||((0 + 23.641) / 176.477)|
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|
|=||(-8.217 - -0.288||-||-8.746)||/||160.571|
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 -2.71 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
Richardson Electronics Ltd Annual Data
Richardson Electronics Ltd Quarterly Data