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GuruFocus has detected 9 Warning Signs with Microsoft Corp $MSFT.
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Microsoft Corp (NAS:MSFT)
Beneish M-Score
-2.82 (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.

Microsoft Corp has a M-score of -2.82 suggests that the company is not a manipulator.

MSFT' s Beneish M-Score Range Over the Past 10 Years
Min: -3.43   Max: -0.16
Current: -2.82

-3.43
-0.16

During the past 13 years, the highest Beneish M-Score of Microsoft Corp was -0.16. The lowest was -3.43. And the median was -2.70.


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 Microsoft 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 * 1.0475+0.528 * 1.0258+0.404 * 1.2525+0.892 * 1.0042+0.115 * 0.9783
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0173+4.679 * -0.0919-0.327 * 1.2157
=-2.82

* 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 $12,882 Mil.
Revenue was 22090 + 24090 + 20453 + 20614 = $87,247 Mil.
Gross Profit was 14030 + 14189 + 12609 + 12635 = $53,463 Mil.
Total Current Assets was $146,313 Mil.
Total Assets was $225,017 Mil.
Property, Plant and Equipment(Net PPE) was $21,962 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,345 Mil.
Selling, General & Admin. Expense(SGA) was $19,608 Mil.
Total Current Liabilities was $52,005 Mil.
Long-Term Debt was $76,222 Mil.
Net Income was 4801 + 5200 + 4690 + 3122 = $17,813 Mil.
Non Operating Income was 551 + 396 + 244 + 338 = $1,529 Mil.
Cash Flow from Operations was 10660 + 6293 + 11549 + 8464 = $36,966 Mil.
Accounts Receivable was $12,247 Mil.
Revenue was 20531 + 23796 + 20379 + 22180 = $86,886 Mil.
Gross Profit was 12809 + 13924 + 13172 + 14712 = $54,617 Mil.
Total Current Assets was $128,421 Mil.
Total Assets was $181,869 Mil.
Property, Plant and Equipment(Net PPE) was $16,831 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,205 Mil.
Selling, General & Admin. Expense(SGA) was $19,194 Mil.
Total Current Liabilities was $44,354 Mil.
Long-Term Debt was $40,896 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)
=(12882 / 87247) / (12247 / 86886)
=0.14764978 / 0.14095481
=1.0475

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)
=(54617 / 86886) / (53463 / 87247)
=0.6286053 / 0.61277752
=1.0258

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 - (146313 + 21962) / 225017) / (1 - (128421 + 16831) / 181869)
=0.25216761 / 0.20133723
=1.2525

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
=87247 / 86886
=1.0042

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))
=(6205 / (6205 + 16831)) / (8345 / (8345 + 21962))
=0.269361 / 0.27534893
=0.9783

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)
=(19608 / 87247) / (19194 / 86886)
=0.22474125 / 0.22091016
=1.0173

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)
=((76222 + 52005) / 225017) / ((40896 + 44354) / 181869)
=0.56985472 / 0.46874399
=1.2157

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
=(17813 - 1529 - 36966) / 225017
=-0.0919

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.

Microsoft Corp has a M-score of -2.82 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.

Microsoft Corp Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 1.05421.01410.85161.08751.02880.99891.04941.00210.85021.1194
GMI 1.0460.97871.02030.9881.03131.01981.03261.07261.06371.0506
AQI 1.17141.08440.84490.97890.890.97660.94461.20380.80890.8699
SGI 1.15451.18190.96721.06931.11941.0541.0561.11541.07770.9117
DEPI 0.91991.00380.97650.9781.0250.95850.96670.95510.99331.0861
SGAI 0.94881.04620.95080.95560.93910.96251.04270.90530.92051.0394
LVGI 1.16611.09180.96250.91351.0370.9560.98121.09471.15481.1646
TATA -0.0854-0.063-0.0413-0.0643-0.041-0.1215-0.0492-0.0605-0.0987-0.0849
M-score -2.65-2.61-2.87-2.62-2.57-2.98-2.63-2.56-3.09-2.92

Microsoft Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.90390.80960.85020.89530.95091.07511.11941.03361.01631.0475
GMI 1.08381.07411.06371.03421.02711.03351.05061.06421.04981.0258
AQI 1.12261.09780.80890.80740.78950.81010.86990.79551.28041.2525
SGI 1.12011.13721.07770.99180.94250.91670.91170.94090.97281.0042
DEPI 0.88370.91020.99331.05571.10261.11951.08611.06931.05170.9783
SGAI 0.91460.93870.92050.94980.98180.9921.03941.02321.00811.0173
LVGI 1.05981.10721.15481.19961.23171.21091.16461.25341.25191.2157
TATA -0.068-0.0682-0.0987-0.0992-0.1064-0.116-0.0849-0.0931-0.0924-0.0919
M-score -2.70-2.81-3.09-3.16-3.21-3.14-2.92-3.07-2.86-2.82
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