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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 Vivus was 178.35. The lowest was -10000000.00. And the median was -2.47.
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 Vivus 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 * 0.906||+||0.528 * 1.2586||+||0.404 * 1.3775||+||0.892 * 0.8519||+||0.115 * 0.6558|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.921||+||4.679 * -0.2631||-||0.327 * 1.3478|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $10.3 Mil.|
Revenue was 22.985 + 32.166 + 21.732 + 33.877 = $110.8 Mil.
Gross Profit was 13.115 + 22.27 + 12.161 + 26.609 = $74.2 Mil.
Total Current Assets was $304.4 Mil.
Total Assets was $311.3 Mil.
Property, Plant and Equipment(Net PPE) was $1.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.4 Mil.
Selling, General & Admin. Expense(SGA) was $103.3 Mil.
Total Current Liabilities was $64.6 Mil.
Long-Term Debt was $217.7 Mil.
Net Income was -49.352 + -15.466 + -25.447 + -15.825 = $-106.1 Mil.
Non Operating Income was -16.278 + 0 + 49.098 + -16.27 = $16.6 Mil.
Cash Flow from Operations was -9.062 + -11.422 + -6.143 + -14.107 = $-40.7 Mil.
|Accounts Receivable was $13.3 Mil.
Revenue was 21.881 + 36.691 + 44.057 + 27.379 = $130.0 Mil.
Gross Profit was 14.866 + 27.158 + 40.892 + 26.638 = $109.6 Mil.
Total Current Assets was $393.6 Mil.
Total Assets was $400.7 Mil.
Property, Plant and Equipment(Net PPE) was $1.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.0 Mil.
Selling, General & Admin. Expense(SGA) was $131.6 Mil.
Total Current Liabilities was $52.7 Mil.
Long-Term Debt was $216.8 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)|
|=||(10.254 / 110.76)||/||(13.284 / 130.008)|
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)|
|=||(22.27 / 130.008)||/||(13.115 / 110.76)|
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 - (304.399 + 1.153) / 311.321)||/||(1 - (393.559 + 1.725) / 400.674)|
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))|
|=||(0.978 / (0.978 + 1.725))||/||(1.419 / (1.419 + 1.153))|
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)|
|=||(103.265 / 110.76)||/||(131.611 / 130.008)|
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)|
|=||((217.65 + 64.566) / 311.321)||/||((216.841 + 52.654) / 400.674)|
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|
|=||(-106.09 - 16.55||-||-40.734)||/||311.321|
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.
Vivus has a M-score of -3.78 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
Vivus Annual Data
Vivus Quarterly Data