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GuruFocus has detected 6 Warning Signs with Xerox Corp $XRX.
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Xerox Corp (NYSE:XRX)
Beneish M-Score
-2.95 (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.

Xerox Corp has a M-score of -2.95 suggests that the company is not a manipulator.

XRX' s Beneish M-Score Range Over the Past 10 Years
Min: -3.18   Max: -1.94
Current: -2.95

-3.18
-1.94

During the past 13 years, the highest Beneish M-Score of Xerox Corp was -1.94. The lowest was -3.18. And the median was -2.52.


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 Xerox Corp 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 * 0.9578+0.528 * 1.0102+0.404 * 0.7992+0.892 * 0.9395+0.115 * 0.9875
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0013+4.679 * -0.0503-0.327 * 1.2115
=-2.95

* 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 $961 Mil.
Revenue was -2107 + 4212 + 4385 + 4281 = $10,771 Mil.
Gross Profit was 307 + 1307 + 1367 + 1280 = $4,261 Mil.
Total Current Assets was $6,992 Mil.
Total Assets was $18,145 Mil.
Property, Plant and Equipment(Net PPE) was $1,135 Mil.
Depreciation, Depletion and Amortization(DDA) was $563 Mil.
Selling, General & Admin. Expense(SGA) was $2,695 Mil.
Total Current Liabilities was $4,654 Mil.
Long-Term Debt was $5,305 Mil.
Net Income was -847 + 181 + 155 + 34 = $-477 Mil.
Non Operating Income was -39 + -164 + -236 + -221 = $-660 Mil.
Cash Flow from Operations was 573 + 370 + 177 + -25 = $1,095 Mil.
Accounts Receivable was $1,068 Mil.
Revenue was -1927 + 4333 + 4590 + 4469 = $11,465 Mil.
Gross Profit was 775 + 987 + 1426 + 1394 = $4,582 Mil.
Total Current Assets was $6,685 Mil.
Total Assets was $25,541 Mil.
Property, Plant and Equipment(Net PPE) was $1,212 Mil.
Depreciation, Depletion and Amortization(DDA) was $590 Mil.
Selling, General & Admin. Expense(SGA) was $2,865 Mil.
Total Current Liabilities was $5,254 Mil.
Long-Term Debt was $6,317 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)
=(961 / 10771) / (1068 / 11465)
=0.08922106 / 0.09315307
=0.9578

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)
=(4582 / 11465) / (4261 / 10771)
=0.39965111 / 0.39559929
=1.0102

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 - (6992 + 1135) / 18145) / (1 - (6685 + 1212) / 25541)
=0.55210802 / 0.69081085
=0.7992

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
=10771 / 11465
=0.9395

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))
=(590 / (590 + 1212)) / (563 / (563 + 1135))
=0.32741398 / 0.33156655
=0.9875

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)
=(2695 / 10771) / (2865 / 11465)
=0.25020889 / 0.24989097
=1.0013

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)
=((5305 + 4654) / 18145) / ((6317 + 5254) / 25541)
=0.54885643 / 0.45303629
=1.2115

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
=(-477 - -660 - 1095) / 18145
=-0.0503

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 Corp has a M-score of -2.95 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.

Xerox Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.15220.7370.98261.07180.90881.0441.0241.64810.44540.9578
GMI 1.00161.00910.98081.11561.06391.00621.02530.80431.00851.0102
AQI 1.08061.00430.9461.24741.03140.9830.97320.97241.1150.7992
SGI 1.08971.07330.86211.42521.01230.93250.97970.63380.90430.9395
DEPI 1.03770.92930.91410.82030.9030.96040.95551.43670.85340.9875
SGAI 0.98730.97971.06150.77690.95061.00451.0041.21371.01131.0013
LVGI 0.98071.16380.97320.84191.00230.9950.97441.03311.01131.2115
TATA -0.02940.059-0.0373-0.035-0.0014-0.0199-0.0241-0.0213-0.0305-0.0529
M-score -2.35-2.43-2.84-1.97-2.52-2.60-2.58-2.42-3.19-2.97

Xerox Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.09651.6511.61591.40441.28340.44540.86480.99850.95960.9578
GMI 0.98820.80340.80850.81590.89141.00851.01981.01110.85851.0102
AQI 0.99430.97240.98240.98041.01431.1151.06241.03840.99860.7992
SGI 0.92330.63270.63120.62770.61770.90430.91110.92070.9470.9395
DEPI 0.94181.43671.50921.70431.78790.85340.96380.87540.89540.9875
SGAI 1.0121.21411.2341.24531.25271.01131.00170.99290.98361.0013
LVGI 1.04141.03311.03961.0671.09131.01131.02851.01280.95671.2115
TATA -0.0164-0.0213-0.018-0.0227-0.0233-0.0284-0.0263-0.0168-0.0105-0.0503
M-score -2.57-2.42-2.43-2.63-2.70-3.18-2.78-2.63-2.68-2.95
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