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GuruFocus has detected 4 Warning Signs with Taiwan Semiconductor Manufacturing Co Ltd $TSM.
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Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM)
Beneish M-Score
-2.57 (As of Today)

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.

Taiwan Semiconductor Manufacturing Co Ltd has a M-score of -2.53 suggests that the company is not a manipulator.

TSM' s Beneish M-Score Range Over the Past 10 Years
Min: -4.48   Max: 114774.86
Current: -2.57

-4.48
114774.86

During the past 13 years, the highest Beneish M-Score of Taiwan Semiconductor Manufacturing Co Ltd was 114774.86. The lowest was -4.48. And the median was -2.91.


Definition

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 Taiwan Semiconductor Manufacturing Co 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 * 1.3826+0.528 * 0.971+0.404 * 1.0877+0.892 * 1.1196+0.115 * 1.1547
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9973+4.679 * -0.1159-0.327 * 1.0204
=-2.53

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $4,045 Mil.
Revenue was 8194.44349307 + 8278.73684679 + 6867.17789474 + 6244.60254577 = $29,585 Mil.
Gross Profit was 4284.6048343 + 4197.92565536 + 3539.75962848 + 2802.84950625 = $14,825 Mil.
Total Current Assets was $25,554 Mil.
Total Assets was $58,946 Mil.
Property, Plant and Equipment(Net PPE) was $31,180 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,978 Mil.
Selling, General & Admin. Expense(SGA) was $802 Mil.
Total Current Liabilities was $10,884 Mil.
Long-Term Debt was $4,785 Mil.
Net Income was 3052.04074936 + 3075.99315874 + 2244.77773994 + 1987.93070328 = $10,361 Mil.
Non Operating Income was 91.0504523367 + 89.3356476625 + 89.9942724458 + 80.9872834286 = $351 Mil.
Cash Flow from Operations was 5788.02821831 + 4018.58962621 + 3302.67464396 + 3729.32032012 = $16,839 Mil.
Accounts Receivable was $2,613 Mil.
Revenue was 6207.07095043 + 6505.2780116 + 6648.92297933 + 7062.55905236 = $26,424 Mil.
Gross Profit was 3016.87757125 + 3132.45553192 + 3226.8855791 + 3480.77383565 = $12,857 Mil.
Total Current Assets was $22,773 Mil.
Total Assets was $50,545 Mil.
Property, Plant and Equipment(Net PPE) was $26,028 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,967 Mil.
Selling, General & Admin. Expense(SGA) was $718 Mil.
Total Current Liabilities was $7,312 Mil.
Long-Term Debt was $5,855 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(4045.2992922 / 29584.9607804) / (2613.26908708 / 26423.8309937)
=0.13673499 / 0.09889819
=1.3826

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(12856.9925179 / 26423.8309937) / (14825.1396244 / 29584.9607804)
=0.48656807 / 0.50110391
=0.971

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (25553.6350995 + 31180.0659365) / 58945.8508461) / (1 - (22773.1812568 + 26027.9745658) / 50545.0481084)
=0.03752851 / 0.03450174
=1.0877

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=29584.9607804 / 26423.8309937
=1.1196

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))
=(6966.81074589 / (6966.81074589 + 26027.9745658)) / (6977.50664441 / (6977.50664441 + 31180.0659365))
=0.21114884 / 0.18286034
=1.1547

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)
=(802.118795389 / 29584.9607804) / (718.333622323 / 26423.8309937)
=0.02711238 / 0.02718507
=0.9973

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)
=((4784.78148779 + 10883.7674411) / 58945.8508461) / ((5855.28125524 + 7312.24287522) / 50545.0481084)
=0.26581258 / 0.26051067
=1.0204

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(10360.7423513 - 351.367655874 - 16838.6128086) / 58945.8508461
=-0.1159

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.

Taiwan Semiconductor Manufacturing Co Ltd has a M-score of -2.53 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Taiwan Semiconductor Manufacturing Co Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.07330125587.99430.79840.89741.06531.05031.24960.67251.3443
GMI 1.11281.03680.9730.88611.08610.94321.02230.95181.01770.9713
AQI 1.0051.05250.91830.93190.86621.16990.90950.3791.02971.0877
SGI 1.01991.00940.91271.52981.00621.23571.15131.21141.05721.1515
DEPI 0.96590.93681.09961.23651.0241.02661.06550.83710.95081.1286
SGAI 0.99931.20931.12220.81211.00990.99840.8970.80380.8630.9976
LVGI 0.51451.17251.09331.25351.04161.34021.3170.8930.88651.0204
TATA -0.1396-0.2216-0.1211-0.1081-0.149-0.1303-0.1347-0.1182-0.1573-0.1163
M-score -2.83-4.49115,536.82-2.81-3.29-2.89-3.03-2.84-3.39-2.54

Taiwan Semiconductor Manufacturing Co Ltd Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.23371.21420.97020.86030.65340.67311.00231.12711.36821.3826
GMI 0.98530.95170.95360.96550.991.01771.04741.02350.99610.971
AQI 0.38580.3790.38660.82210.89741.02971.18231.41991.31481.0877
SGI 1.15931.24671.32841.29831.19681.05630.94130.93071.01031.1196
DEPI 0.9380.8180.7790.79650.84590.95231.00671.04711.14811.1547
SGAI 0.83610.80570.74990.74560.78610.86160.94720.99041.01280.9973
LVGI 0.93380.8930.86560.9340.87610.88650.93651.010.95441.0204
TATA -0.1153-0.1204-0.1347-0.1446-0.1754-0.1614-0.1407-0.123-0.1174-0.1159
M-score -2.88-2.86-3.06-3.07-3.43-3.41-3.06-2.81-2.53-2.53
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