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GuruFocus has detected 4 Warning Signs with Xerox Corp $XRX.
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Xerox Corp (NYSE:XRX)
Beneish M-Score
-3.52 (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.

Xerox Corp has a M-score of -3.52 suggests that the company is not a manipulator.

XRX' s Beneish M-Score Range Over the Past 10 Years
Min: -3.76   Max: -1.11
Current: -3.52

-3.76
-1.11

During the past 13 years, the highest Beneish M-Score of Xerox Corp was -1.11. The lowest was -3.76. And the median was -2.48.


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 Xerox 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 * 0.3313+0.528 * 0.9947+0.404 * 0.9514+0.892 * 0.9306+0.115 * 0.8474
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.004+4.679 * -0.0672-0.327 * 1.0333
=-3.52

* 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 $661 Mil.
Revenue was 2454 + -2107 + 4212 + 4385 = $8,944 Mil.
Gross Profit was 954 + 307 + 1307 + 1367 = $3,935 Mil.
Total Current Assets was $4,715 Mil.
Total Assets was $15,916 Mil.
Property, Plant and Equipment(Net PPE) was $1,113 Mil.
Depreciation, Depletion and Amortization(DDA) was $406 Mil.
Selling, General & Admin. Expense(SGA) was $2,477 Mil.
Total Current Liabilities was $2,624 Mil.
Long-Term Debt was $4,988 Mil.
Net Income was 16 + -847 + 181 + 155 = $-495 Mil.
Non Operating Income was -216 + -39 + -164 + -236 = $-655 Mil.
Cash Flow from Operations was 110 + 573 + 370 + 177 = $1,230 Mil.
Accounts Receivable was $2,144 Mil.
Revenue was 2615 + -1927 + 4333 + 4590 = $9,611 Mil.
Gross Profit was 1018 + 775 + 987 + 1426 = $4,206 Mil.
Total Current Assets was $6,808 Mil.
Total Assets was $24,857 Mil.
Property, Plant and Equipment(Net PPE) was $1,489 Mil.
Depreciation, Depletion and Amortization(DDA) was $436 Mil.
Selling, General & Admin. Expense(SGA) was $2,651 Mil.
Total Current Liabilities was $6,146 Mil.
Long-Term Debt was $5,359 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)
=(661 / 8944) / (2144 / 9611)
=0.07390429 / 0.22307772
=0.3313

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)
=(4206 / 9611) / (3935 / 8944)
=0.43762356 / 0.43995975
=0.9947

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 - (4715 + 1113) / 15916) / (1 - (6808 + 1489) / 24857)
=0.63382759 / 0.66621073
=0.9514

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
=8944 / 9611
=0.9306

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))
=(436 / (436 + 1489)) / (406 / (406 + 1113))
=0.22649351 / 0.26728111
=0.8474

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)
=(2477 / 8944) / (2651 / 9611)
=0.27694544 / 0.27582978
=1.004

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)
=((4988 + 2624) / 15916) / ((5359 + 6146) / 24857)
=0.47826087 / 0.46284749
=1.0333

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
=(-495 - -655 - 1230) / 15916
=-0.0672

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.

Xerox Corp has a M-score of -3.52 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.

Xerox Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.15220.7370.98261.07180.90881.03521.03081.6510.3091.1063
GMI 1.01390.99690.98081.11561.06391.01161.0210.80341.00850.9099
AQI 1.08061.00430.9461.24741.03140.9830.97320.97241.1150.7992
SGI 1.08971.07330.86211.42521.01230.94030.97320.63270.90430.7942
DEPI 1.03770.92930.91410.82030.9030.96040.95551.43670.85341.2229
SGAI 0.98730.97951.06230.77650.95061.00041.00781.21411.01131.1049
LVGI 0.98071.16380.97320.84191.00230.9950.97441.03311.01131.2115
TATA -0.02930.059-0.0316-0.03550.0025-0.0194-0.0242-0.0213-0.0284-0.0528
M-score -2.34-2.44-2.81-1.97-2.50-2.60-2.59-2.42-3.31-3.00

Xerox Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.6511.61591.40441.28340.3091.01471.17531.13181.10630.3313
GMI 0.80340.80850.81590.89141.00850.92330.91320.77060.90990.9947
AQI 0.97240.98240.98041.01431.1151.06241.03840.99860.79920.9514
SGI 0.63270.63120.62770.61770.90430.77650.78210.80290.79420.9306
DEPI 1.43671.50921.70431.78790.85341.19881.09931.15491.22290.8474
SGAI 1.21411.2341.24531.25271.01131.10021.09281.0841.10491.004
LVGI 1.03311.03961.0671.09131.01131.02851.01280.95671.21151.0333
TATA -0.0213-0.018-0.0227-0.0233-0.0284-0.0281-0.0187-0.0124-0.0528-0.0672
M-score -2.42-2.43-2.63-2.70-3.31-2.82-2.64-2.70-3.00-3.52
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