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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 Corp was -1.00. The lowest was -3.84. And the median was -2.57.
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 * 0.877||+||0.528 * 1.1227||+||0.404 * 1.0143||+||0.892 * 0.9842||+||0.115 * 0.9408|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.96||+||4.679 * -0.037||-||0.327 * 1.0913|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $2,612 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.
Net Income was -34 + 12 + 225 + 156 = $359 Mil.
Non Operating Income was -40 + -225 + -6 + -38 = $-309 Mil.
Cash Flow from Operations was 271 + 349 + 113 + 857 = $1,590 Mil.
|Accounts Receivable was $3,026 Mil.
Revenue was 4795 + 4941 + 4771 + 4213 = $18,720 Mil.
Gross Profit was 1542 + 1585 + 1503 + 1556 = $6,186 Mil.
Total Current Assets was $7,882 Mil.
Total Assets was $27,877 Mil.
Property, Plant and Equipment(Net PPE) was $1,914 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,416 Mil.
Selling, General & Admin. Expense(SGA) was $3,829 Mil.
Total Current Liabilities was $5,703 Mil.
Long-Term Debt was $6,355 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)|
|=||(2612 / 18425)||/||(3026 / 18720)|
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)|
|=||(1426 / 18720)||/||(987 / 18425)|
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 - (6999 + 1535) / 24946)||/||(1 - (7882 + 1914) / 27877)|
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))|
|=||(1416 / (1416 + 1914))||/||(1266 / (1266 + 1535))|
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)|
|=||(3618 / 18425)||/||(3829 / 18720)|
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)|
|=||((6393 + 5382) / 24946)||/||((6355 + 5703) / 27877)|
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|
|=||(359 - -309||-||1590)||/||24946|
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 -2.74 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 Corp Annual Data
Xerox Corp Quarterly Data