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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 -2.65.
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 * 0.9188||+||0.528 * 0.9098||+||0.404 * 0.8053||+||0.892 * 0.9654||+||0.115 * 0.9897|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9889||+||4.679 * -0.1039||-||0.327 * 0.9171|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $7.30 Mil.|
Revenue was 8.354 + 7.93 + 8.399 + 8.543 = $33.23 Mil.
Gross Profit was 2.115 + 2.178 + 2.197 + 2.488 = $8.98 Mil.
Total Current Assets was $14.13 Mil.
Total Assets was $30.49 Mil.
Property, Plant and Equipment(Net PPE) was $10.83 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.99 Mil.
Selling, General & Admin. Expense(SGA) was $7.40 Mil.
Total Current Liabilities was $7.92 Mil.
Long-Term Debt was $2.30 Mil.
Net Income was 0.19 + 0.259 + 0.352 + 0.199 = $1.00 Mil.
Non Operating Income was 0.014 + 0.205 + 0.312 + -0.005 = $0.53 Mil.
Cash Flow from Operations was 0.661 + 0.688 + 1.698 + 0.595 = $3.64 Mil.
|Accounts Receivable was $8.23 Mil.
Revenue was 8.897 + 8.093 + 9.387 + 8.039 = $34.42 Mil.
Gross Profit was 2.443 + 1.797 + 2.254 + 1.967 = $8.46 Mil.
Total Current Assets was $12.86 Mil.
Total Assets was $32.87 Mil.
Property, Plant and Equipment(Net PPE) was $12.60 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.29 Mil.
Selling, General & Admin. Expense(SGA) was $7.76 Mil.
Total Current Liabilities was $9.54 Mil.
Long-Term Debt was $2.47 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)|
|=||(7.302 / 33.226)||/||(8.232 / 34.416)|
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)|
|=||(2.178 / 34.416)||/||(2.115 / 33.226)|
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 - (14.128 + 10.825) / 30.49)||/||(1 - (12.862 + 12.596) / 32.87)|
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))|
|=||(2.285 / (2.285 + 12.596))||/||(1.988 / (1.988 + 10.825))|
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)|
|=||(7.404 / 33.226)||/||(7.755 / 34.416)|
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)|
|=||((2.296 + 7.918) / 30.49)||/||((2.469 + 9.537) / 32.87)|
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|
|=||(1 - 0.526||-||3.642)||/||30.49|
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 -3.17 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