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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 Xerox Corporation was -1.00. The lowest was -3.84. And the median was -2.56.
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 * 1.0501||+||0.528 * 1.0149||+||0.404 * 0.9804||+||0.892 * 0.9509||+||0.115 * 0.9237|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9921||+||4.679 * -0.0337||-||0.327 * 1.067|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $2,722 Mil.|
Revenue was 4590 + 4469 + 4040 + 5120 = $18,219 Mil.
Gross Profit was 1426 + 1394 + 1502 + 1575 = $5,897 Mil.
Total Current Assets was $7,832 Mil.
Total Assets was $26,016 Mil.
Property, Plant and Equipment(Net PPE) was $1,578 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,298 Mil.
Selling, General & Admin. Expense(SGA) was $3,681 Mil.
Total Current Liabilities was $5,730 Mil.
Long-Term Debt was $5,998 Mil.
Net Income was 12 + 225 + 156 + 266 = $659 Mil.
Non Operating Income was -225 + -6 + -128 + -18 = $-377 Mil.
Cash Flow from Operations was 349 + 113 + 857 + 595 = $1,914 Mil.
|Accounts Receivable was $2,726 Mil.
Revenue was 4941 + 4771 + 4213 + 5235 = $19,160 Mil.
Gross Profit was 1585 + 1503 + 1556 + 1650 = $6,294 Mil.
Total Current Assets was $7,979 Mil.
Total Assets was $28,508 Mil.
Property, Plant and Equipment(Net PPE) was $1,968 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,407 Mil.
Selling, General & Admin. Expense(SGA) was $3,902 Mil.
Total Current Liabilities was $5,690 Mil.
Long-Term Debt was $6,354 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)|
|=||(2722 / 18219)||/||(2726 / 19160)|
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)|
|=||(1394 / 19160)||/||(1426 / 18219)|
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 - (7832 + 1578) / 26016)||/||(1 - (7979 + 1968) / 28508)|
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))|
|=||(1407 / (1407 + 1968))||/||(1298 / (1298 + 1578))|
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)|
|=||(3681 / 18219)||/||(3902 / 19160)|
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)|
|=||((5998 + 5730) / 26016)||/||((6354 + 5690) / 28508)|
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|
|=||(659 - -377||-||1914)||/||26016|
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 -2.66 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