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GuruFocus has detected 3 Warning Signs with Xerox Corp $XRX.
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Xerox Corp (NYSE:XRX)
Beneish M-Score
-2.58 (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 -2.58 suggests that the company is not a manipulator.

XRX' s Beneish M-Score Range Over the Past 10 Years
Min: -3.76   Max: -1.11
Current: -2.58

-3.76
-1.11

During the past 13 years, the highest Beneish M-Score of Xerox Corp was -1.11. The lowest was -3.76. And the median was -2.50.


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 * 0.9551+0.528 * 0.9538+0.404 * 0.9986+0.892 * 0.9515+0.115 * 1.034
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0034+4.679 * -0.0027-0.327 * 0.9567
=-2.58

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $2,180 Mil.
Revenue was 4212 + 4385 + 4281 + 4653 = $17,531 Mil.
Gross Profit was 1307 + 1367 + 1280 + 1456 = $5,410 Mil.
Total Current Assets was $7,007 Mil.
Total Assets was $24,642 Mil.
Property, Plant and Equipment(Net PPE) was $1,446 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,123 Mil.
Selling, General & Admin. Expense(SGA) was $3,454 Mil.
Total Current Liabilities was $5,782 Mil.
Long-Term Debt was $5,346 Mil.
Net Income was 181 + 155 + 34 + 271 = $641 Mil.
Non Operating Income was -164 + -236 + -221 + -71 = $-692 Mil.
Cash Flow from Operations was 370 + 177 + -25 + 878 = $1,400 Mil.
Accounts Receivable was $2,399 Mil.
Revenue was 4333 + 4590 + 4469 + 5033 = $18,425 Mil.
Gross Profit was 987 + 1426 + 1394 + 1616 = $5,423 Mil.
Total Current Assets was $6,999 Mil.
Total Assets was $24,946 Mil.
Property, Plant and Equipment(Net PPE) was $1,535 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,266 Mil.
Selling, General & Admin. Expense(SGA) was $3,618 Mil.
Total Current Liabilities was $5,382 Mil.
Long-Term Debt was $6,393 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)
=(2180 / 17531) / (2399 / 18425)
=0.12435115 / 0.13020353
=0.9551

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)
=(5423 / 18425) / (5410 / 17531)
=0.29432836 / 0.3085962
=0.9538

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 - (7007 + 1446) / 24642) / (1 - (6999 + 1535) / 24946)
=0.65696778 / 0.65790107
=0.9986

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
=17531 / 18425
=0.9515

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))
=(1266 / (1266 + 1535)) / (1123 / (1123 + 1446))
=0.45198144 / 0.43713507
=1.034

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)
=(3454 / 17531) / (3618 / 18425)
=0.19702242 / 0.19636364
=1.0034

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)
=((5346 + 5782) / 24642) / ((6393 + 5382) / 24946)
=0.45158672 / 0.47201956
=0.9567

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
=(641 - -692 - 1400) / 24642
=-0.0027

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 -2.58 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

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 1.06311.15220.7370.98261.07180.90881.0441.0241.06940.9469
GMI 1.01541.00161.00910.98081.11561.06391.00621.02531.01411.096
AQI 0.95511.08061.00430.9461.24741.03140.9830.97320.97241.0823
SGI 1.01541.08971.07330.86211.42521.01230.93250.97970.97670.9235
DEPI 1.16971.03770.92930.91410.82030.9030.96040.95550.86531.0451
SGAI 0.96030.98730.97971.06150.77690.95061.00451.0040.95221.0174
LVGI 0.9990.98071.16380.97320.84191.00230.9950.97441.03311.0467
TATA -0.013-0.02940.059-0.0373-0.035-0.0014-0.0199-0.0241-0.0192-0.0237
M-score -2.45-2.35-2.43-2.84-1.97-2.52-2.60-2.58-2.55-2.64

Xerox Corp Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 1.02461.09651.07131.03960.89430.80550.94690.84890.98360.9551
GMI 0.99380.98821.01291.0241.03791.12271.0961.10631.09770.9538
AQI 0.99970.99430.97240.98240.98041.01431.08231.06241.03840.9986
SGI 0.94310.92330.9750.9810.98580.98420.92350.92820.93460.9515
DEPI 0.96110.94180.86530.88090.92370.94081.04511.05021.01581.034
SGAI 1.00541.0120.95250.96150.96320.961.01741.01081.00561.0034
LVGI 0.97781.04141.03311.03961.0671.09131.04671.02851.01280.9567
TATA -0.029-0.0164-0.0192-0.0158-0.0204-0.021-0.0215-0.0185-0.009-0.0027
M-score -2.65-2.57-2.55-2.55-2.70-2.73-2.63-2.69-2.53-2.58
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