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GuruFocus has detected 4 Warning Signs with Li & Fung Ltd $LFUGF.
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Li & Fung Ltd (OTCPK:LFUGF)
Beneish M-Score
-2.69 (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.

Li & Fung Ltd has a M-score of -2.69 suggests that the company is not a manipulator.

LFUGF' s Beneish M-Score Range Over the Past 10 Years
Min: -3.48   Max: -1.94
Current: -2.69

-3.48
-1.94

During the past 13 years, the highest Beneish M-Score of Li & Fung Ltd was -1.94. The lowest was -3.48. And the median was -2.44.


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 Li & Fung Ltd 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 * 1+0.528 * 0.9907+0.404 * 0.9389+0.892 * 0.8901+0.115 * 0.987
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0388+4.679 * -0.0216-0.327 * 0.9053
=-2.69

* 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 $0 Mil.
Revenue was $16,761 Mil.
Gross Profit was $1,940 Mil.
Total Current Assets was $3,514 Mil.
Total Assets was $7,693 Mil.
Property, Plant and Equipment(Net PPE) was $222 Mil.
Depreciation, Depletion and Amortization(DDA) was $103 Mil.
Selling, General & Admin. Expense(SGA) was $1,550 Mil.
Total Current Liabilities was $3,278 Mil.
Long-Term Debt was $753 Mil.
Net Income was $223 Mil.
Non Operating Income was $0 Mil.
Cash Flow from Operations was $390 Mil.
Accounts Receivable was $0 Mil.
Revenue was $18,831 Mil.
Gross Profit was $2,159 Mil.
Total Current Assets was $3,346 Mil.
Total Assets was $7,933 Mil.
Property, Plant and Equipment(Net PPE) was $242 Mil.
Depreciation, Depletion and Amortization(DDA) was $110 Mil.
Selling, General & Admin. Expense(SGA) was $1,676 Mil.
Total Current Liabilities was $3,339 Mil.
Long-Term Debt was $1,254 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)
=(0 / 16760.632) / (0 / 18830.835)
=0 / 0
=1

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)
=(2159.18 / 18830.835) / (1939.831 / 16760.632)
=0.11466194 / 0.11573734
=0.9907

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 - (3514.428 + 221.55) / 7692.884) / (1 - (3345.687 + 241.626) / 7933.099)
=0.51435924 / 0.54780433
=0.9389

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
=16760.632 / 18830.835
=0.8901

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))
=(110.456 / (110.456 + 241.626)) / (103.229 / (103.229 + 221.55))
=0.31372237 / 0.31784383
=0.987

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)
=(1549.986 / 16760.632) / (1676.401 / 18830.835)
=0.09247778 / 0.08902425
=1.0388

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)
=((753.458 + 3278.479) / 7692.884) / ((1253.823 + 3339.181) / 7933.099)
=0.52411254 / 0.57896719
=0.9053

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
=(223.146 - 0 - 389.593) / 7692.884
=-0.0216

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.

Li & Fung Ltd has a M-score of -2.69 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.

Li & Fung Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1111.08670.7661.10821.05250.827901
GMI 1.0211.00810.90690.8490.91291.05111.21621.03120.98640.9907
AQI 1.43671.07911.15451.16081.15370.98731.0320.83861.05370.9389
SGI 1.35581.20490.9431.18111.25881.00960.94081.01380.97630.8901
DEPI 0.84310.65650.90790.8860.82771.01242.01780.62861.01840.987
SGAI 0.98471.05161.03461.13841.15091.10820.67481.03891.0471.0388
LVGI 0.87620.92541.19940.84410.93510.94741.00311.36550.99030.9053
TATA -0.0302-0.0308-0.0809-0.0207-0.02220.0026-0.0103-0.0232-0.0155-0.0216
M-score -2.09-2.43-2.98-2.34-2.58-2.34-2.23-2.95-3.48-2.69
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