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GuruFocus has detected 3 Warning Signs with ARRIS International PLC $ARRS.
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ARRIS International PLC (NAS:ARRS)
Beneish M-Score
-2.73 (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.

ARRIS International PLC has a M-score of -2.73 suggests that the company is not a manipulator.

ARRS' s Beneish M-Score Range Over the Past 10 Years
Min: -4.27   Max: -0.89
Current: -2.73

-4.27
-0.89

During the past 13 years, the highest Beneish M-Score of ARRIS International PLC was -0.89. The lowest was -4.27. And the median was -2.48.


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 ARRIS International PLC 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 * 0.8537+0.528 * 1.1377+0.404 * 0.882+0.892 * 1.2885+0.115 * 0.8387
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7799+4.679 * -0.088-0.327 * 1.015
=-2.73

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

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $1,070 Mil.
Revenue was 1483.105 + 1759.223 + 1725.145 + 1730.044 = $6,698 Mil.
Gross Profit was 337.257 + 436 + 442.85 + 444.734 = $1,661 Mil.
Total Current Assets was $3,082 Mil.
Total Assets was $7,355 Mil.
Property, Plant and Equipment(Net PPE) was $354 Mil.
Depreciation, Depletion and Amortization(DDA) was $488 Mil.
Selling, General & Admin. Expense(SGA) was $439 Mil.
Total Current Liabilities was $1,689 Mil.
Long-Term Debt was $2,159 Mil.
Net Income was -39.098 + 88.283 + 48.162 + 84.228 = $182 Mil.
Non Operating Income was -9.185 + 21.964 + -17.51 + -1.807 = $-7 Mil.
Cash Flow from Operations was 249.983 + 35.299 + 288.967 + 260.764 = $835 Mil.
Accounts Receivable was $973 Mil.
Revenue was 1614.706 + 1101.682 + 1221.416 + 1260.077 = $5,198 Mil.
Gross Profit was 384.032 + 358.673 + 359.333 + 364.361 = $1,466 Mil.
Total Current Assets was $2,526 Mil.
Total Assets was $7,313 Mil.
Property, Plant and Equipment(Net PPE) was $369 Mil.
Depreciation, Depletion and Amortization(DDA) was $349 Mil.
Selling, General & Admin. Expense(SGA) was $437 Mil.
Total Current Liabilities was $1,528 Mil.
Long-Term Debt was $2,242 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)
=(1069.771 / 6697.517) / (972.54 / 5197.881)
=0.15972651 / 0.18710317
=0.8537

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)
=(1466.399 / 5197.881) / (1660.841 / 6697.517)
=0.28211477 / 0.24797862
=1.1377

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 - (3082.491 + 354.05) / 7354.731) / (1 - (2526.437 + 369.255) / 7313.036)
=0.53274416 / 0.60403696
=0.882

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
=6697.517 / 5197.881
=1.2885

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))
=(349.271 / (349.271 + 369.255)) / (488.034 / (488.034 + 354.05))
=0.48609375 / 0.57955501
=0.8387

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)
=(438.864 / 6697.517) / (436.723 / 5197.881)
=0.06552637 / 0.08401943
=0.7799

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)
=((2159.3 + 1688.887) / 7354.731) / ((2242.071 + 1527.729) / 7313.036)
=0.52322607 / 0.51549042
=1.015

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
=(181.575 - -6.538 - 835.013) / 7354.731
=-0.088

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.

ARRIS International PLC has a M-score of -2.73 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.

ARRIS International PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.27790.84290.93120.89271.20920.99491.22830.65721.20811.4652
GMI 1.04290.78930.82221.07121.03421.10341.20980.95011.00541.1826
AQI 2.62390.76430.88470.97151.03120.94971.6940.91440.97661.1447
SGI 1.13311.1330.96790.98171.00111.24342.67491.47010.90141.4232
DEPI 1.49640.34681.03830.98731.05360.93771.32010.84640.93930.8445
SGAI 1.01081.27251.06480.94521.08260.86950.78380.82571.12690.7651
LVGI 0.74911.00350.91210.86971.14650.97612.44460.87650.98170.9329
TATA 0.0051-0.2354-0.1032-0.0387-0.096-0.0231-0.1384-0.0208-0.0478-0.0429
M-score -1.27-3.94-3.17-2.70-2.76-2.32-1.43-2.48-2.63-1.68

ARRIS International PLC Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.65720.9571.01870.9761.20811.21241.2171.37061.46520.8537
GMI 0.95010.94860.99861.02671.00541.0491.08081.09971.18261.1377
AQI 0.91440.91160.95160.94930.97661.30581.21321.20781.14470.882
SGI 1.47011.18271.04530.94320.90140.97831.10181.24431.42321.2885
DEPI 0.84640.93480.96430.95560.93931.00230.92310.87290.84450.8387
SGAI 0.82570.87640.92231.00851.12691.08410.97150.88640.76510.7799
LVGI 0.87650.910.91030.93030.98170.89260.9180.91640.93291.015
TATA -0.0208-0.00360.0212-0.0123-0.0478-0.0374-0.0516-0.0578-0.0429-0.088
M-score -2.48-2.39-2.30-2.60-2.63-2.31-2.28-2.02-1.68-2.73
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