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GuruFocus has detected 2 Warning Signs with Motorola Solutions Inc $MSI.
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Motorola Solutions Inc (NYSE:MSI)
Beneish M-Score
-2.94 (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.

Motorola Solutions Inc has a M-score of -2.94 suggests that the company is not a manipulator.

MSI' s Beneish M-Score Range Over the Past 10 Years
Min: -3.72   Max: -0.86
Current: -2.94

-3.72
-0.86

During the past 13 years, the highest Beneish M-Score of Motorola Solutions Inc was -0.86. The lowest was -3.72. And the median was -2.57.


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 Motorola Solutions 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 * 0.8619+0.528 * 0.9845+0.404 * 1.1655+0.892 * 1.0814+0.115 * 0.53
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9534+4.679 * -0.0835-0.327 * 1.0713
=-2.94

* 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 1281 + 1883 + 1532 + 1430 = $6,126 Mil.
Gross Profit was 570 + 928 + 762 + 676 = $2,936 Mil.
Total Current Assets was $3,073 Mil.
Total Assets was $8,140 Mil.
Property, Plant and Equipment(Net PPE) was $820 Mil.
Depreciation, Depletion and Amortization(DDA) was $313 Mil.
Selling, General & Admin. Expense(SGA) was $997 Mil.
Total Current Liabilities was $2,385 Mil.
Long-Term Debt was $4,414 Mil.
Net Income was 77 + 243 + 192 + 107 = $619 Mil.
Non Operating Income was -5 + 7 + 6 + -3 = $5 Mil.
Cash Flow from Operations was 142 + 513 + 348 + 291 = $1,294 Mil.
Accounts Receivable was $1,148 Mil.
Revenue was 1193 + 1682 + 1422 + 1368 = $5,665 Mil.
Gross Profit was 502 + 838 + 685 + 648 = $2,673 Mil.
Total Current Assets was $4,001 Mil.
Total Assets was $9,049 Mil.
Property, Plant and Equipment(Net PPE) was $997 Mil.
Depreciation, Depletion and Amortization(DDA) was $171 Mil.
Selling, General & Admin. Expense(SGA) was $967 Mil.
Total Current Liabilities was $2,032 Mil.
Long-Term Debt was $5,023 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)
=(1070 / 6126) / (1148 / 5665)
=0.17466536 / 0.20264784
=0.8619

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)
=(2673 / 5665) / (2936 / 6126)
=0.47184466 / 0.47926869
=0.9845

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 - (3073 + 820) / 8140) / (1 - (4001 + 997) / 9049)
=0.52174447 / 0.44767378
=1.1655

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
=6126 / 5665
=1.0814

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))
=(171 / (171 + 997)) / (313 / (313 + 820))
=0.14640411 / 0.27625772
=0.53

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)
=(997 / 6126) / (967 / 5665)
=0.16274894 / 0.17069726
=0.9534

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)
=((4414 + 2385) / 8140) / ((5023 + 2032) / 9049)
=0.83525799 / 0.77964416
=1.0713

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
=(619 - 5 - 1294) / 8140
=-0.0835

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.

Motorola Solutions Inc has a M-score of -2.94 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.

Motorola Solutions Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.82910.7971.22831.41111.13271.3190.67061.1910.9980.9764
GMI 1.09390.97580.87350.63670.99070.9921.02841.02941.00811.0051
AQI 2.09490.99631.04640.96861.04411.14341.01730.80681.3511.2802
SGI 0.85520.82320.66310.38531.06490.76421.08530.86420.96851.0602
DEPI 0.741.05130.97330.94220.95461.90140.74140.85861.01760.8653
SGAI 1.34381.02831.12561.52220.95150.99570.92770.93520.86240.9527
LVGI 1.00841.11440.86020.93060.84011.15391.16941.13081.44621.0649
TATA -0.026-0.1506-0.0308-0.00830.0256-0.0170.04130.1884-0.0609-0.0694
M-score -2.49-3.58-2.74-2.97-2.11-2.37-2.56-1.65-2.77-2.69

Motorola Solutions Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.1910.64730.98021.05850.9981.09830.96960.95240.97640.8619
GMI 1.02941.03611.01971.00281.00811.01041.01231.00561.00510.9845
AQI 0.80680.91870.9390.97891.3511.40131.50071.33671.28021.1655
SGI 0.86420.96960.98240.99350.96850.96430.9791.00021.06021.0814
DEPI 0.85860.62770.83530.82941.01761.68821.10091.00550.86530.53
SGAI 0.93520.89060.8320.80580.86240.88510.9610.96510.95270.9534
LVGI 1.13081.20561.29421.50581.44621.36861.42651.05371.06491.0713
TATA 0.18840.18660.11890.0641-0.0609-0.038-0.0611-0.0562-0.0694-0.0835
M-score -1.65-2.06-2.06-2.29-2.77-2.45-2.72-2.66-2.69-2.94
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