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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 -1.11. The lowest was -3.76. And the median was -2.50.
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 * 0.9836||+||0.528 * 1.0977||+||0.404 * 1.0384||+||0.892 * 0.9346||+||0.115 * 1.0158|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0056||+||4.679 * -0.009||-||0.327 * 1.0128|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $2,209 Mil.|
Revenue was 4385 + 4281 + 4653 + 4333 = $17,652 Mil.
Gross Profit was 1367 + 1280 + 1456 + 987 = $5,090 Mil.
Total Current Assets was $6,851 Mil.
Total Assets was $24,641 Mil.
Property, Plant and Equipment(Net PPE) was $1,457 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,165 Mil.
Selling, General & Admin. Expense(SGA) was $3,482 Mil.
Total Current Liabilities was $5,895 Mil.
Long-Term Debt was $5,355 Mil.
Net Income was 155 + 34 + 271 + -34 = $426 Mil.
Non Operating Income was -236 + -221 + -71 + -125 = $-653 Mil.
Cash Flow from Operations was 177 + -25 + 878 + 271 = $1,301 Mil.
|Accounts Receivable was $2,403 Mil.
Revenue was 4590 + 4469 + 5033 + 4795 = $18,887 Mil.
Gross Profit was 1426 + 1394 + 1616 + 1542 = $5,978 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 $3,705 Mil.
Total Current Liabilities was $5,730 Mil.
Long-Term Debt was $5,998 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)|
|=||(2209 / 17652)||/||(2403 / 18887)|
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)|
|=||(5978 / 18887)||/||(5090 / 17652)|
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 - (6851 + 1457) / 24641)||/||(1 - (7832 + 1578) / 26016)|
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))|
|=||(1298 / (1298 + 1578))||/||(1165 / (1165 + 1457))|
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)|
|=||(3482 / 17652)||/||(3705 / 18887)|
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)|
|=||((5355 + 5895) / 24641)||/||((5998 + 5730) / 26016)|
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|
|=||(426 - -653||-||1301)||/||24641|
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 -2.53 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