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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 11 years, the highest Beneish M-Score of VMWare Inc was -2.40. The lowest was -3.46. And the median was -2.82.
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 VMWare Inc 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 * 1.0345||+||0.528 * 1.0184||+||0.404 * 0.9302||+||0.892 * 1.1507||+||0.115 * 1.1192|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0875||+||4.679 * -0.0823||-||0.327 * 1.0193|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $988 Mil.|
Revenue was 1511 + 1702 + 1515 + 1457 = $6,185 Mil.
Gross Profit was 1268 + 1447 + 1273 + 1239 = $5,227 Mil.
Total Current Assets was $8,705 Mil.
Total Assets was $14,807 Mil.
Property, Plant and Equipment(Net PPE) was $1,059 Mil.
Depreciation, Depletion and Amortization(DDA) was $338 Mil.
Selling, General & Admin. Expense(SGA) was $2,932 Mil.
Total Current Liabilities was $3,774 Mil.
Long-Term Debt was $1,500 Mil.
Net Income was 196 + 326 + 194 + 167 = $883 Mil.
Non Operating Income was -2 + -19 + 9 + 0 = $-12 Mil.
Cash Flow from Operations was 683 + 415 + 606 + 409 = $2,113 Mil.
|Accounts Receivable was $830 Mil.
Revenue was 1360 + 1483 + 1289 + 1243 = $5,375 Mil.
Gross Profit was 1159 + 1291 + 1106 + 1070 = $4,626 Mil.
Total Current Assets was $7,797 Mil.
Total Assets was $13,699 Mil.
Property, Plant and Equipment(Net PPE) was $886 Mil.
Depreciation, Depletion and Amortization(DDA) was $329 Mil.
Selling, General & Admin. Expense(SGA) was $2,343 Mil.
Total Current Liabilities was $3,287 Mil.
Long-Term Debt was $1,500 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)|
|=||(988 / 6185)||/||(830 / 5375)|
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)|
|=||(1447 / 5375)||/||(1268 / 6185)|
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 - (8705 + 1059) / 14807)||/||(1 - (7797 + 886) / 13699)|
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))|
|=||(329 / (329 + 886))||/||(338 / (338 + 1059))|
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)|
|=||(2932 / 6185)||/||(2343 / 5375)|
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)|
|=||((1500 + 3774) / 14807)||/||((1500 + 3287) / 13699)|
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|
|=||(883 - -12||-||2113)||/||14807|
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.
VMWare Inc has a M-score of -2.73 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
VMWare Inc Annual Data
VMWare Inc Quarterly Data