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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 Trio-Tech International was 21.11. The lowest was -4.07. And the median was -2.54.
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 Trio-Tech International 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 * 0.7934||+||0.528 * 0.9073||+||0.404 * 1.1646||+||0.892 * 1.0999||+||0.115 * 1.1111|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0084||+||4.679 * -0.0891||-||0.327 * 0.9117|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $7.85 Mil.|
Revenue was 8.093 + 9.387 + 8.039 + 9.339 = $34.86 Mil.
Gross Profit was 1.797 + 2.254 + 1.967 + 1.987 = $8.01 Mil.
Total Current Assets was $12.28 Mil.
Total Assets was $33.34 Mil.
Property, Plant and Equipment(Net PPE) was $13.33 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.32 Mil.
Selling, General & Admin. Expense(SGA) was $7.93 Mil.
Total Current Liabilities was $9.56 Mil.
Long-Term Debt was $2.69 Mil.
Net Income was -0.136 + 0.282 + 0.157 + -0.365 = $-0.06 Mil.
Non Operating Income was 0.043 + -0.11 + 0.068 + -0.206 = $-0.21 Mil.
Cash Flow from Operations was 0.466 + 0.706 + 0.953 + 0.988 = $3.11 Mil.
|Accounts Receivable was $9.00 Mil.
Revenue was 9.497 + 8.516 + 6.458 + 7.221 = $31.69 Mil.
Gross Profit was 2.091 + 1.697 + 1.267 + 1.548 = $6.60 Mil.
Total Current Assets was $15.52 Mil.
Total Assets was $35.04 Mil.
Property, Plant and Equipment(Net PPE) was $12.54 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.47 Mil.
Selling, General & Admin. Expense(SGA) was $7.15 Mil.
Total Current Liabilities was $11.49 Mil.
Long-Term Debt was $2.62 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)|
|=||(7.85 / 34.858)||/||(8.996 / 31.692)|
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)|
|=||(2.254 / 31.692)||/||(1.797 / 34.858)|
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 - (12.278 + 13.326) / 33.335)||/||(1 - (15.518 + 12.54) / 35.035)|
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))|
|=||(2.468 / (2.468 + 12.54))||/||(2.315 / (2.315 + 13.326))|
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)|
|=||(7.925 / 34.858)||/||(7.145 / 31.692)|
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)|
|=||((2.689 + 9.556) / 33.335)||/||((2.623 + 11.493) / 35.035)|
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|
|=||(-0.062 - -0.205||-||3.113)||/||33.335|
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.
Trio-Tech International has a M-score of -2.94 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
Trio-Tech International Annual Data
Trio-Tech International Quarterly Data