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GuruFocus has detected 5 Warning Signs with Quality Systems Inc $QSII.
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Quality Systems Inc (NAS:QSII)
Beneish M-Score
-3.40 (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.

Quality Systems Inc has a M-score of -3.40 suggests that the company is not a manipulator.

QSII' s Beneish M-Score Range Over the Past 10 Years
Min: -3.7   Max: -1.69
Current: -3.4

-3.7
-1.69

During the past 13 years, the highest Beneish M-Score of Quality Systems Inc was -1.69. The lowest was -3.70. And the median was -2.63.


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 Quality Systems 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 * 0.8572+0.528 * 0.9639+0.404 * 1.0447+0.892 * 1.0348+0.115 * 0.8988
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0121+4.679 * -0.1946-0.327 * 0.6631
=-3.40

* 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 $83.4 Mil.
Revenue was 132.385 + 127.868 + 127.166 + 122.205 = $509.6 Mil.
Gross Profit was 76.415 + 73.516 + 71.169 + 65.39 = $286.5 Mil.
Total Current Assets was $146.8 Mil.
Total Assets was $473.2 Mil.
Property, Plant and Equipment(Net PPE) was $27.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $40.4 Mil.
Selling, General & Admin. Expense(SGA) was $163.6 Mil.
Total Current Liabilities was $128.7 Mil.
Long-Term Debt was $15.0 Mil.
Net Income was 4.415 + 10.486 + 3.987 + -0.647 = $18.2 Mil.
Non Operating Income was -0.116 + -0.004 + -0.055 + -0.087 = $-0.3 Mil.
Cash Flow from Operations was 29.169 + 25.038 + 43.452 + 12.933 = $110.6 Mil.
Accounts Receivable was $94.0 Mil.
Revenue was 127.912 + 117.032 + 125.369 + 122.164 = $492.5 Mil.
Gross Profit was 68.657 + 63.247 + 68.771 + 66.187 = $266.9 Mil.
Total Current Assets was $184.0 Mil.
Total Assets was $530.8 Mil.
Property, Plant and Equipment(Net PPE) was $25.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $29.7 Mil.
Selling, General & Admin. Expense(SGA) was $156.2 Mil.
Total Current Liabilities was $138.1 Mil.
Long-Term Debt was $105.0 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)
=(83.407 / 509.624) / (94.024 / 492.477)
=0.1636638 / 0.19092059
=0.8572

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)
=(266.862 / 492.477) / (286.49 / 509.624)
=0.54187708 / 0.56215955
=0.9639

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 - (146.802 + 27.426) / 473.221) / (1 - (183.991 + 25.79) / 530.79)
=0.6318253 / 0.6047759
=1.0447

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
=509.624 / 492.477
=1.0348

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))
=(29.739 / (29.739 + 25.79)) / (40.434 / (40.434 + 27.426))
=0.535558 / 0.59584439
=0.8988

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)
=(163.623 / 509.624) / (156.234 / 492.477)
=0.32106612 / 0.31724121
=1.0121

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)
=((15 + 128.694) / 473.221) / ((105 + 138.06) / 530.79)
=0.30365094 / 0.45792121
=0.6631

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
=(18.241 - -0.262 - 110.592) / 473.221
=-0.1946

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.

Quality Systems Inc has a M-score of -3.40 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.

Quality Systems Inc Annual Data

Mar08Mar09Mar10Mar11Mar12Mar13Mar14Mar15Mar16Mar17
DSRI 1.00930.89341.00381.07410.85730.950.76920.88640.86930.8572
GMI 1.0181.04221.02850.97030.98621.10251.16450.92681.00530.9639
AQI 2.1071.33541.12120.84091.12821.1211.30140.9531.74441.0447
SGI 1.18671.31641.18861.21091.21641.07070.96621.10251.00461.0348
DEPI 0.8791.00550.99981.06811.0720.9560.94090.9541.09130.8988
SGAI 0.991.00471.03851.02870.9781.07541.0410.96150.98321.0121
LVGI 0.99690.880.9931.1050.81460.97540.97091.20981.35980.6631
TATA -0.0238-0.0096-0.0229-0.0225-0.0022-0.057-0.198-0.1202-0.0659-0.1946
M-score -1.97-2.14-2.36-2.44-2.31-2.64-3.44-3.18-2.71-3.40

Quality Systems Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.77460.88640.81890.85440.84630.86930.82140.8050.79590.8572
GMI 0.95270.92680.90340.87880.97841.00531.01651.01980.99540.9639
AQI 1.00590.9531.00111.00511.02861.74441.72511.78831.77891.0447
SGI 1.08231.10251.09151.07971.03341.00460.9960.98991.02471.0348
DEPI 0.92470.9541.00841.04281.08351.09131.00320.9190.8670.8988
SGAI 0.96570.96150.97550.97750.97810.98320.98551.03371.00031.0121
LVGI 1.09221.20981.11670.98470.95651.35981.34051.17371.02070.6631
TATA -0.1607-0.1202-0.089-0.0497-0.0425-0.0659-0.1013-0.1854-0.2101-0.1946
M-score -3.42-3.18-3.06-2.82-2.76-2.71-2.93-3.28-3.34-3.40
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