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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 4 years, the highest Beneish M-Score of ShangPharma Corp was 0.00. The lowest was 0.00. And the median was 0.00.
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 ShangPharma Corp 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 *||+||0.528 *||+||0.404 *||+||0.892 *||+||0.115 *|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 *||+||4.679 *||-||0.327 *|
|This Year (Sep12) TTM:||Last Year (Sep11) TTM:|
|Accounts Receivable was $30.6 Mil.|
Revenue was 31.885 + 31.826 + 30.753 + 30.484 = $124.9 Mil.
Gross Profit was 8.784 + 8.859 + 9.295 + 9.957 = $36.9 Mil.
Total Current Assets was $72.3 Mil.
Total Assets was $169.8 Mil.
Property, Plant and Equipment(Net PPE) was $89.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.0 Mil.
Selling, General & Admin. Expense(SGA) was $31.5 Mil.
Total Current Liabilities was $26.0 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 1.568 + 0.409 + 1.733 + 2.159 = $5.9 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 0 + 0 + 0 + 0 = $0.0 Mil.
|Accounts Receivable was $20.5 Mil.
Revenue was 28.836 + 24.774 + 25.608 + 23.118 = $102.3 Mil.
Gross Profit was 8.993 + 8 + 8.264 + 7.503 = $32.8 Mil.
Total Current Assets was $69.0 Mil.
Total Assets was $155.5 Mil.
Property, Plant and Equipment(Net PPE) was $78.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $3.5 Mil.
Selling, General & Admin. Expense(SGA) was $24.2 Mil.
Total Current Liabilities was $26.5 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)|
|=||(30.566 / 124.948)||/||(20.548 / 102.336)|
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)|
|=||(32.76 / 102.336)||/||(36.895 / 124.948)|
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 - (72.299 + 89.498) / 169.83)||/||(1 - (69.016 + 78.646) / 155.533)|
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))|
|=||(3.527 / (3.527 + 78.646))||/||(0 / (0 + 89.498))|
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)|
|=||(31.465 / 124.948)||/||(24.244 / 102.336)|
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 + 26.011) / 169.83)||/||((0 + 26.513) / 155.533)|
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|
|=||(5.869 - 0||-||0)||/||169.83|
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.
ShangPharma Corp has a M-score of 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
ShangPharma Corp Annual Data
ShangPharma Corp Quarterly Data