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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 TE Connectivity Ltd was -2.25. The lowest was -4.25. And the median was -2.63.
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 TE Connectivity 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 * 1.0334||+||0.528 * 1.0126||+||0.404 * 1.1085||+||0.892 * 0.9682||+||0.115 * 0.9907|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9537||+||4.679 * 0.0169||-||0.327 * 1.0289|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $2,095 Mil.|
Revenue was 2952 + 2833 + 2984 + 3118 = $11,887 Mil.
Gross Profit was 962 + 945 + 968 + 1048 = $3,923 Mil.
Total Current Assets was $5,414 Mil.
Total Assets was $17,841 Mil.
Property, Plant and Equipment(Net PPE) was $2,899 Mil.
Depreciation, Depletion and Amortization(DDA) was $599 Mil.
Selling, General & Admin. Expense(SGA) was $1,434 Mil.
Total Current Liabilities was $3,097 Mil.
Long-Term Debt was $3,732 Mil.
Net Income was 380 + 353 + 1040 + 309 = $2,082 Mil.
Non Operating Income was 12 + 8 + 9 + 11 = $40 Mil.
Cash Flow from Operations was 154 + 366 + 624 + 596 = $1,740 Mil.
|Accounts Receivable was $2,094 Mil.
Revenue was 3082 + 3049 + 3072 + 3075 = $12,278 Mil.
Gross Profit was 1051 + 1020 + 1014 + 1018 = $4,103 Mil.
Total Current Assets was $7,612 Mil.
Total Assets was $20,243 Mil.
Property, Plant and Equipment(Net PPE) was $2,878 Mil.
Depreciation, Depletion and Amortization(DDA) was $588 Mil.
Selling, General & Admin. Expense(SGA) was $1,553 Mil.
Total Current Liabilities was $4,141 Mil.
Long-Term Debt was $3,390 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)|
|=||(2095 / 11887)||/||(2094 / 12278)|
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)|
|=||(4103 / 12278)||/||(3923 / 11887)|
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 - (5414 + 2899) / 17841)||/||(1 - (7612 + 2878) / 20243)|
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))|
|=||(588 / (588 + 2878))||/||(599 / (599 + 2899))|
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)|
|=||(1434 / 11887)||/||(1553 / 12278)|
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)|
|=||((3732 + 3097) / 17841)||/||((3390 + 4141) / 20243)|
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|
|=||(2082 - 40||-||1740)||/||17841|
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.
TE Connectivity Ltd has a M-score of -2.35 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
TE Connectivity Ltd Annual Data
TE Connectivity Ltd Quarterly Data