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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 -55.78. And the median was -2.38.
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 * 0.3906||+||0.528 * 1.2665||+||0.404 * 1.3711||+||0.892 * 0.9648||+||0.115 * 0.6997|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7933||+||4.679 * -0.2089||-||0.327 * 1.233|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $11.7 Mil.|
Revenue was 32.166 + 21.732 + 33.877 + 21.881 = $109.7 Mil.
Gross Profit was 22.27 + 12.161 + 26.609 + 14.866 = $75.9 Mil.
Total Current Assets was $347.1 Mil.
Total Assets was $354.7 Mil.
Property, Plant and Equipment(Net PPE) was $1.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.3 Mil.
Selling, General & Admin. Expense(SGA) was $109.3 Mil.
Total Current Liabilities was $59.5 Mil.
Long-Term Debt was $217.5 Mil.
Net Income was -15.466 + -25.447 + -15.825 + -25.825 = $-82.6 Mil.
Non Operating Income was 0 + 49.098 + -16.27 + -16.682 = $16.1 Mil.
Cash Flow from Operations was -11.422 + -6.143 + -14.107 + 7.062 = $-24.6 Mil.
|Accounts Receivable was $31.1 Mil.
Revenue was 36.691 + 44.057 + 27.379 + 5.534 = $113.7 Mil.
Gross Profit was 27.158 + 40.892 + 26.638 + 4.962 = $99.7 Mil.
Total Current Assets was $413.5 Mil.
Total Assets was $420.9 Mil.
Property, Plant and Equipment(Net PPE) was $1.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.0 Mil.
Selling, General & Admin. Expense(SGA) was $142.9 Mil.
Total Current Liabilities was $50.0 Mil.
Long-Term Debt was $216.6 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)|
|=||(11.712 / 109.656)||/||(31.079 / 113.661)|
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)|
|=||(12.161 / 113.661)||/||(22.27 / 109.656)|
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 - (347.075 + 1.189) / 354.728)||/||(1 - (413.544 + 1.758) / 420.896)|
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))|
|=||(1.003 / (1.003 + 1.758))||/||(1.284 / (1.284 + 1.189))|
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)|
|=||(109.33 / 109.656)||/||(142.854 / 113.661)|
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)|
|=||((217.522 + 59.479) / 354.728)||/||((216.594 + 49.964) / 420.896)|
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|
|=||(-82.563 - 16.146||-||-24.61)||/||354.728|
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 -3.83 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