Advanced Micro Devices Beneish M-Score Calculation
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski 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 Advanced Micro Devices 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 * 1.0672 | + | 0.528 * 0.9169 | + | 0.404 * 0.7808 | + | 0.892 * 1.4355 | + | 0.115 * 0.8967 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9121 | + | 4.679 * 0.0131 | - | 0.327 * 0.7627 |
| = | -2.02 |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
| This Year (Sep20) TTM: | Last Year (Sep19) TTM: |
Accounts Receivable was $2,134 Mil.
Revenue was 2801 + 1932 + 1786 + 2127 = $8,646 Mil.
Gross Profit was 1230 + 848 + 818 + 949 = $3,845 Mil.
Total Current Assets was $5,500 Mil.
Total Assets was $7,023 Mil.
Property, Plant and Equipment(Net PPE) was $810 Mil.
Depreciation, Depletion and Amortization(DDA) was $326 Mil.
Selling, General, & Admin. Expense(SGA) was $893 Mil.
Total Current Liabilities was $2,417 Mil.
Long-Term Debt & Capital Lease Obligation was $578 Mil.
Net Income was 390 + 157 + 162 + 170 = $879 Mil.
Non Operating Income was -37 + 1 + 4 + -140 = $-172 Mil.
Cash Flow from Operations was 339 + 243 + -65 + 442 = $959 Mil.
|
Accounts Receivable was $1,393 Mil.
Revenue was 1801 + 1531 + 1272 + 1419 = $6,023 Mil.
Gross Profit was 777 + 621 + 521 + 537 = $2,456 Mil.
Total Current Assets was $3,912 Mil.
Total Assets was $5,253 Mil.
Property, Plant and Equipment(Net PPE) was $658 Mil.
Depreciation, Depletion and Amortization(DDA) was $228 Mil.
Selling, General, & Admin. Expense(SGA) was $682 Mil.
Total Current Liabilities was $1,864 Mil.
Long-Term Debt & Capital Lease Obligation was $1,073 Mil.
|
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Accounts Receivable 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) |
| = | (2134 / 8646) | / | (1393 / 6023) |
| = | 0.24681934 | / | 0.23128009 |
| | = | 1.0672 |
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) |
| = | (2456 / 6023) | / | (3845 / 8646) |
| = | 0.40777021 | / | 0.44471432 |
| | = | 0.9169 |
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 Property, Plant and Equipment to Total Assets.
| AQI | = | (1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) | / | (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1) |
| = | (1 - (5500 + 810) / 7023) | / | (1 - (3912 + 658) / 5253) |
| = | 0.10152357 | / | 0.13002094 |
| | = | 0.7808 |
4. SGI = Sales Growth Index
Ratio of Revenue 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 |
| = | 8646 | / | 6023 |
| | = | 1.4355 |
5. DEPI = Depreciation Index
Measured as the ratio of the rate of Depreciation, Depletion and Amortization 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)) |
| = | (228 / (228 + 658)) | / | (326 / (326 + 810)) |
| = | 0.25733634 | / | 0.28697183 |
| | = | 0.8967 |
Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.
6. SGAI = Sales, General and Administrative expenses Index
The ratio of Selling, General, & Admin. Expense(SGA) to Sales 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) |
| = | (893 / 8646) | / | (682 / 6023) |
| = | 0.10328476 | / | 0.11323261 |
| | = | 0.9121 |
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 in leverage
| LVGI | = | ((LTD_t + CurrentLiabilities_t) / TotalAssets_t) | / | ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1) |
| = | ((578 + 2417) / 7023) | / | ((1073 + 1864) / 5253) |
| = | 0.42645593 | / | 0.55910908 |
| | = | 0.7627 |
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 |
| = | (879 - -172 | - | 959) | / | 7023 |
| | = | 0.0131 |
An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.
Advanced Micro Devices has a M-score of -2.02 suggests that the company is unlikely to be a manipulator.
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