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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 -2.55.
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 * 1.0381||+||0.528 * 0.8505||+||0.404 * 1.0258||+||0.892 * 0.9867||+||0.115 * 0.6421|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0458||+||4.679 * -0.159||-||0.327 * 0.8776|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $8.36 Mil.|
Revenue was 8.543 + 8.897 + 8.093 + 9.387 = $34.92 Mil.
Gross Profit was 2.488 + 2.443 + 1.797 + 2.254 = $8.98 Mil.
Total Current Assets was $12.83 Mil.
Total Assets was $31.71 Mil.
Property, Plant and Equipment(Net PPE) was $12.21 Mil.
Depreciation, Depletion and Amortization(DDA) was $3.92 Mil.
Selling, General & Admin. Expense(SGA) was $7.83 Mil.
Total Current Liabilities was $8.53 Mil.
Long-Term Debt was $2.39 Mil.
Net Income was 0.199 + 0.094 + -0.136 + 0.282 = $0.44 Mil.
Non Operating Income was -0.005 + 0.003 + 0.043 + -0.11 = $-0.07 Mil.
Cash Flow from Operations was 3.098 + 1.279 + 0.466 + 0.706 = $5.55 Mil.
|Accounts Receivable was $8.16 Mil.
Revenue was 8.039 + 9.339 + 9.497 + 8.516 = $35.39 Mil.
Gross Profit was 1.967 + 1.987 + 2.091 + 1.697 = $7.74 Mil.
Total Current Assets was $14.16 Mil.
Total Assets was $34.20 Mil.
Property, Plant and Equipment(Net PPE) was $13.02 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.41 Mil.
Selling, General & Admin. Expense(SGA) was $7.59 Mil.
Total Current Liabilities was $10.59 Mil.
Long-Term Debt was $2.83 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)|
|=||(8.361 / 34.92)||/||(8.163 / 35.391)|
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)|
|=||(2.443 / 35.391)||/||(2.488 / 34.92)|
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 - (12.834 + 12.208) / 31.71)||/||(1 - (14.162 + 13.024) / 34.196)|
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))|
|=||(2.41 / (2.41 + 13.024))||/||(3.923 / (3.923 + 12.208))|
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)|
|=||(7.83 / 34.92)||/||(7.588 / 35.391)|
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)|
|=||((2.392 + 8.527) / 31.71)||/||((2.83 + 10.588) / 34.196)|
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|
|=||(0.439 - -0.069||-||5.549)||/||31.71|
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 -3.28 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