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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 -1.91. The lowest was -3.21. And the median was -2.65.
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 * 1.0267||+||0.528 * 1.0137||+||0.404 * 0.9724||+||0.892 * 0.9766||+||0.115 * 0.8653|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9521||+||4.679 * -0.0355||-||0.327 * 1.0331|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $2,546 Mil.|
Revenue was 4040 + 5120 + 5292 + 5121 = $19,573 Mil.
Gross Profit was 1502 + 1575 + 1628 + 1547 = $6,252 Mil.
Total Current Assets was $8,874 Mil.
Total Assets was $27,658 Mil.
Property, Plant and Equipment(Net PPE) was $1,648 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,426 Mil.
Selling, General & Admin. Expense(SGA) was $3,793 Mil.
Total Current Liabilities was $6,076 Mil.
Long-Term Debt was $6,314 Mil.
Net Income was 156 + 266 + 266 + 281 = $969 Mil.
Non Operating Income was -128 + -18 + 11 + 22 = $-113 Mil.
Cash Flow from Operations was 857 + 595 + 325 + 286 = $2,063 Mil.
|Accounts Receivable was $2,539 Mil.
Revenue was 4213 + 5235 + 5391 + 5202 = $20,041 Mil.
Gross Profit was 1556 + 1650 + 1697 + 1586 = $6,489 Mil.
Total Current Assets was $8,511 Mil.
Total Assets was $29,036 Mil.
Property, Plant and Equipment(Net PPE) was $2,025 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,358 Mil.
Selling, General & Admin. Expense(SGA) was $4,079 Mil.
Total Current Liabilities was $5,686 Mil.
Long-Term Debt was $6,904 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)|
|=||(2546 / 19573)||/||(2539 / 20041)|
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)|
|=||(1575 / 20041)||/||(1502 / 19573)|
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 - (8874 + 1648) / 27658)||/||(1 - (8511 + 2025) / 29036)|
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))|
|=||(1358 / (1358 + 2025))||/||(1426 / (1426 + 1648))|
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)|
|=||(3793 / 19573)||/||(4079 / 20041)|
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)|
|=||((6314 + 6076) / 27658)||/||((6904 + 5686) / 29036)|
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|
|=||(969 - -113||-||2063)||/||27658|
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