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GuruFocus has detected 3 Warning Signs with China Information Technology Inc $CNIT.
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China Information Technology Inc (NAS:CNIT)
Beneish M-Score
-3.97 (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.

China Information Technology Inc has a M-score of -3.97 suggests that the company is not a manipulator.

CNIT' s Beneish M-Score Range Over the Past 10 Years
Min: -6.13   Max: 10000000
Current: -3.97

-6.13
10000000

During the past 12 years, the highest Beneish M-Score of China Information Technology Inc was 10000000.00. The lowest was -6.13. And the median was -2.90.


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 China Information Technology Inc 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 * 0.9578+0.528 * 1.4963+0.404 * 0.8062+0.892 * 0.9912+0.115 * 1.015
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7032+4.679 * -0.3483-0.327 * 1.1599
=-3.97

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

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $3.02 Mil.
Revenue was $10.19 Mil.
Gross Profit was $2.59 Mil.
Total Current Assets was $15.65 Mil.
Total Assets was $34.29 Mil.
Property, Plant and Equipment(Net PPE) was $8.68 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.58 Mil.
Selling, General & Admin. Expense(SGA) was $9.68 Mil.
Total Current Liabilities was $21.38 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was $-18.17 Mil.
Non Operating Income was $-3.41 Mil.
Cash Flow from Operations was $-2.82 Mil.
Accounts Receivable was $3.18 Mil.
Revenue was $10.29 Mil.
Gross Profit was $3.90 Mil.
Total Current Assets was $33.89 Mil.
Total Assets was $66.09 Mil.
Property, Plant and Equipment(Net PPE) was $8.37 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.54 Mil.
Selling, General & Admin. Expense(SGA) was $13.89 Mil.
Total Current Liabilities was $35.54 Mil.
Long-Term Debt was $0.00 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)
=(3.019 / 10.194) / (3.18 / 10.285)
=0.2961546 / 0.30918814
=0.9578

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)
=(3.904 / 10.285) / (2.586 / 10.194)
=0.37958192 / 0.25367863
=1.4963

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 - (15.645 + 8.675) / 34.287) / (1 - (33.889 + 8.373) / 66.092)
=0.29069327 / 0.36055801
=0.8062

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
=10.194 / 10.285
=0.9912

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))
=(2.541 / (2.541 + 8.373)) / (2.582 / (2.582 + 8.675))
=0.23282023 / 0.22936839
=1.015

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)
=(9.677 / 10.194) / (13.885 / 10.285)
=0.94928389 / 1.35002431
=0.7032

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)
=((0 + 21.384) / 34.287) / ((0 + 35.539) / 66.092)
=0.62367661 / 0.53772015
=1.1599

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
=(-18.171 - -3.407 - -2.821) / 34.287
=-0.3483

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.

China Information Technology Inc has a M-score of -3.97 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.

China Information Technology Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 2.53061.30471.40980.84861.49641.12260.40470.42861.76010.9578
GMI 1.651.26820.91351.16451.1131.63051.37680.6350.71521.4963
AQI 1.06631923111E+151.14391.04551.05090.93780.96451.50171.18870.75030.8062
SGI 13.95082.81121.1841.62230.6990.75410.64160.69710.26620.9912
DEPI 0.20740.60711.58110.92050.88060.70410.77290.87591.09511.015
SGAI 1.3751.1511.05840.97531.73552.73812.33070.38432.07990.7032
LVGI 0.2113.18341.80691.00860.95391.42511.59561.15540.68651.1599
TATA 0.13110.12330.06630.0155-0.0302-0.2804-0.5844-0.094-0.109-0.3483
M-score 430,792,969,366,507.50-0.59-1.86-1.89-2.52-4.05-6.13-3.79-3.27-3.97
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