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GuruFocus has detected 4 Warning Signs with Taiwan Semiconductor Manufacturing Co Ltd $TSM.
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Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM)
Beneish M-Score
-2.99 (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.

Taiwan Semiconductor Manufacturing Co Ltd has a M-score of -2.91 suggests that the company is not a manipulator.

TSM' s Beneish M-Score Range Over the Past 10 Years
Min: -4.64   Max: 114774.86
Current: -2.99

-4.64
114774.86

During the past 13 years, the highest Beneish M-Score of Taiwan Semiconductor Manufacturing Co Ltd was 114774.86. The lowest was -4.64. And the median was -2.99.


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 Taiwan Semiconductor Manufacturing Co 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 * 0.9882+0.528 * 0.9216+0.404 * 0.9168+0.892 * 1.2096+0.115 * 1.1974
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0215+4.679 * -0.1189-0.327 * 0.9753
=-2.91

* 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 $3,562 Mil.
Revenue was 7632.24443451 + 8194.44349307 + 8278.73684679 + 6867.17789474 = $30,973 Mil.
Gross Profit was 3963.94091756 + 4284.6048343 + 4197.92565536 + 3539.75962848 = $15,986 Mil.
Total Current Assets was $26,940 Mil.
Total Assets was $63,124 Mil.
Property, Plant and Equipment(Net PPE) was $33,847 Mil.
Depreciation, Depletion and Amortization(DDA) was $7,227 Mil.
Selling, General & Admin. Expense(SGA) was $861 Mil.
Total Current Liabilities was $10,492 Mil.
Long-Term Debt was $4,379 Mil.
Net Income was 2859.13914783 + 3052.04074936 + 3075.99315874 + 2244.77773994 = $11,232 Mil.
Non Operating Income was 107.24020921 + 91.0504523367 + 89.3356476625 + 89.9942724458 = $378 Mil.
Cash Flow from Operations was 5253.34007641 + 5788.02821831 + 4018.58962621 + 3302.67464396 = $18,363 Mil.
Accounts Receivable was $2,980 Mil.
Revenue was 6243.59329066 + 6207.07095043 + 6505.2780116 + 6648.92297933 = $25,605 Mil.
Gross Profit was 2802.84950625 + 3016.87757125 + 3132.45553192 + 3226.8855791 = $12,179 Mil.
Total Current Assets was $24,933 Mil.
Total Assets was $52,981 Mil.
Property, Plant and Equipment(Net PPE) was $25,909 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,916 Mil.
Selling, General & Admin. Expense(SGA) was $697 Mil.
Total Current Liabilities was $7,239 Mil.
Long-Term Debt was $5,560 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)
=(3561.74059585 / 30972.6026691) / (2979.62086573 / 25604.865232)
=0.11499649 / 0.11636932
=0.9882

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)
=(12179.0681885 / 25604.865232) / (15986.2310357 / 30972.6026691)
=0.47565445 / 0.51614103
=0.9216

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 - (26939.5384796 + 33846.9215007) / 63123.8441108) / (1 - (24932.676648 + 25908.9540743) / 52981.3865482)
=0.03702855 / 0.04038694
=0.9168

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
=30972.6026691 / 25604.865232
=1.2096

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))
=(6915.90481757 / (6915.90481757 + 25908.9540743)) / (7227.03093662 / (7227.03093662 + 33846.9215007))
=0.21069108 / 0.17595168
=1.1974

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)
=(860.750568394 / 30972.6026691) / (696.624015514 / 25604.865232)
=0.02779071 / 0.02720671
=1.0215

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)
=((4379.24378522 + 10492.4686528) / 63123.8441108) / ((5559.85006475 + 7238.78624867) / 52981.3865482)
=0.2355958 / 0.24156854
=0.9753

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
=(11231.9507959 - 377.620581654 - 18362.6325649) / 63123.8441108
=-0.1189

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.

Taiwan Semiconductor Manufacturing Co Ltd has a M-score of -2.91 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.

Taiwan Semiconductor Manufacturing Co Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.07950133734.06650.82440.83661.10661.03591.21420.67311.3826
GMI 1.11611.02890.97350.88961.08590.94361.02220.95171.01770.971
AQI 1.0051.05250.91830.93190.86621.16990.90950.3791.02971.0877
SGI 1.01411.07150.85711.48141.07941.18961.16721.24671.05631.1196
DEPI 0.97490.89451.15931.26340.96741.05841.05370.8180.95231.1547
SGAI 0.93451.22211.18860.8151.0070.99910.89710.80570.86160.9974
LVGI 0.51451.17251.09331.25351.04161.34021.3170.8930.88651.0204
TATA -0.1358-0.2296-0.1194-0.1042-0.152-0.1283-0.1344-0.1204-0.1614-0.1159
M-score -2.80-4.48123,031.16-2.81-3.30-2.88-3.03-2.86-3.41-2.53

Taiwan Semiconductor Manufacturing Co Ltd Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.21420.97020.86030.65340.67311.00231.12711.36821.38260.9882
GMI 0.95170.95360.96550.991.01771.04741.02350.99610.9710.9216
AQI 0.3790.38660.82210.89741.02971.18231.41991.31481.08770.9168
SGI 1.24671.32841.29831.19681.05630.94130.93061.01031.11961.2096
DEPI 0.8180.7790.79650.84590.95231.00671.04711.14811.15471.1974
SGAI 0.80570.74990.74560.78610.86160.94720.99041.01290.99741.0215
LVGI 0.8930.86560.9340.87610.88650.93651.010.95441.02040.9753
TATA -0.1204-0.1347-0.1446-0.1754-0.1614-0.1407-0.123-0.1174-0.1159-0.1189
M-score -2.86-3.06-3.07-3.43-3.41-3.06-2.81-2.53-2.53-2.91
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