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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 21.10. The lowest was -4.07. And the median was -2.66.
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 * 1.0092||+||0.528 * 1.093||+||0.404 * 0.9502||+||0.892 * 1.0511||+||0.115 * 1.1175|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.911||+||4.679 * -0.0602||-||0.327 * 0.9508|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $8.11 Mil.|
Revenue was 8.971 + 8.815 + 9.355 + 8.354 = $35.50 Mil.
Gross Profit was 2.358 + 2.344 + 2.132 + 2.115 = $8.95 Mil.
Total Current Assets was $14.96 Mil.
Total Assets was $31.53 Mil.
Property, Plant and Equipment(Net PPE) was $11.03 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.82 Mil.
Selling, General & Admin. Expense(SGA) was $7.22 Mil.
Total Current Liabilities was $8.25 Mil.
Long-Term Debt was $2.06 Mil.
Net Income was 0.303 + 0.18 + 0.15 + 0.19 = $0.82 Mil.
Non Operating Income was 0.106 + -0.086 + -0.105 + 0.014 = $-0.07 Mil.
Cash Flow from Operations was 2.466 + -0.332 + -0.003 + 0.661 = $2.79 Mil.
|Accounts Receivable was $7.64 Mil.
Revenue was 7.93 + 8.399 + 8.543 + 8.897 = $33.77 Mil.
Gross Profit was 2.178 + 2.197 + 2.488 + 2.443 = $9.31 Mil.
Total Current Assets was $13.66 Mil.
Total Assets was $30.48 Mil.
Property, Plant and Equipment(Net PPE) was $11.19 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.10 Mil.
Selling, General & Admin. Expense(SGA) was $7.54 Mil.
Total Current Liabilities was $8.27 Mil.
Long-Term Debt was $2.20 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)|
|=||(8.109 / 35.495)||/||(7.644 / 33.769)|
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)|
|=||(9.306 / 33.769)||/||(8.949 / 35.495)|
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 - (14.962 + 11.032) / 31.531)||/||(1 - (13.659 + 11.188) / 30.48)|
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))|
|=||(2.101 / (2.101 + 11.188))||/||(1.818 / (1.818 + 11.032))|
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)|
|=||(7.22 / 35.495)||/||(7.54 / 33.769)|
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)|
|=||((2.06 + 8.246) / 31.531)||/||((2.204 + 8.274) / 30.48)|
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|
|=||(0.823 - -0.071||-||2.792)||/||31.531|
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 -2.63 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