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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.
Xerox Corporation has a M-score of -2.85 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Xerox Corporation was -1.95. The lowest was -3.23. And the median was -2.57.
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 Xerox Corporation 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 * 0.9529||+||0.528 * 1.0235||+||0.404 * 0.9797||+||0.892 * 0.9882||+||0.115 * 0.9565|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9763||+||4.679 * -0.0692||-||0.327 * 0.98|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $4,667 Mil.|
Revenue was 5121 + 5569 + 5262 + 5402 = $21,354 Mil.
Gross Profit was 1547 + 1709 + 1655 + 1698 = $6,609 Mil.
Total Current Assets was $8,462 Mil.
Total Assets was $28,868 Mil.
Property, Plant and Equipment(Net PPE) was $1,979 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,374 Mil.
Selling, General & Admin. Expense(SGA) was $4,058 Mil.
Total Current Liabilities was $6,600 Mil.
Long-Term Debt was $5,896 Mil.
Net Income was 281 + 306 + 286 + 271 = $1,144 Mil.
Non Operating Income was 22 + 626 + -208 + -45 = $395 Mil.
Cash Flow from Operations was 286 + 968 + 961 + 533 = $2,748 Mil.
|Accounts Receivable was $4,956 Mil.
Revenue was 5202 + 5763 + 5275 + 5368 = $21,608 Mil.
Gross Profit was 1586 + 1847 + 1661 + 1751 = $6,845 Mil.
Total Current Assets was $8,260 Mil.
Total Assets was $29,565 Mil.
Property, Plant and Equipment(Net PPE) was $2,043 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,317 Mil.
Selling, General & Admin. Expense(SGA) was $4,206 Mil.
Total Current Liabilities was $5,627 Mil.
Long-Term Debt was $7,432 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)|
|=||(4667 / 21354)||/||(4956 / 21608)|
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)|
|=||(1709 / 21608)||/||(1547 / 21354)|
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 - (8462 + 1979) / 28868)||/||(1 - (8260 + 2043) / 29565)|
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))|
|=||(1317 / (1317 + 2043))||/||(1374 / (1374 + 1979))|
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)|
|=||(4058 / 21354)||/||(4206 / 21608)|
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)|
|=||((5896 + 6600) / 28868)||/||((7432 + 5627) / 29565)|
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|
|=||(1144 - 395||-||2748)||/||28868|
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.
Xerox Corporation has a M-score of -2.85 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
Xerox Corporation Annual Data
Xerox Corporation Quarterly Data