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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 -2.54.
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 * 1.057||+||0.528 * 1.0134||+||0.404 * 0.9824||+||0.892 * 0.9649||+||0.115 * 0.8809|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9748||+||4.679 * -0.0314||-||0.327 * 1.0396|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $2,721 Mil.|
Revenue was 4469 + 4040 + 5120 + 5292 = $18,921 Mil.
Gross Profit was 1394 + 1502 + 1575 + 1628 = $6,099 Mil.
Total Current Assets was $8,358 Mil.
Total Assets was $26,657 Mil.
Property, Plant and Equipment(Net PPE) was $1,583 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,377 Mil.
Selling, General & Admin. Expense(SGA) was $3,747 Mil.
Total Current Liabilities was $5,731 Mil.
Long-Term Debt was $6,265 Mil.
Net Income was 225 + 156 + 266 + 266 = $913 Mil.
Non Operating Income was -6 + -128 + -18 + 11 = $-141 Mil.
Cash Flow from Operations was 113 + 857 + 595 + 325 = $1,890 Mil.
|Accounts Receivable was $2,668 Mil.
Revenue was 4771 + 4213 + 5235 + 5391 = $19,610 Mil.
Gross Profit was 1503 + 1556 + 1650 + 1697 = $6,406 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 $3,984 Mil.
Total Current Liabilities was $6,600 Mil.
Long-Term Debt was $5,896 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)|
|=||(2721 / 18921)||/||(2668 / 19610)|
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)|
|=||(1502 / 19610)||/||(1394 / 18921)|
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 - (8358 + 1583) / 26657)||/||(1 - (8462 + 1979) / 28868)|
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))|
|=||(1374 / (1374 + 1979))||/||(1377 / (1377 + 1583))|
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)|
|=||(3747 / 18921)||/||(3984 / 19610)|
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)|
|=||((6265 + 5731) / 26657)||/||((5896 + 6600) / 28868)|
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|
|=||(913 - -141||-||1890)||/||26657|
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 -2.63 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