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MSFT · MICROSOFT CORP

CIK 789019 · SIC 7372 Services-Prepackaged Software · Latest FY 2025
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-2.09
Beneish M
1.63
Altman Z
0.43
Dechow F
6/9
Piotroski
3/6
Montier C

All metrics — FY2025 · click any row to see the formula

Beneish M-Score-2.09
Composite earnings-manipulation index built from 8 component ratios.
M = −4.84 + 0.92·DSRI + 0.528·GMI + 0.404·AQI + 0.892·SGI + 0.115·DEPI − 0.172·SGAI + 4.679·TATA − 0.327·LVGI
Plugged in:
M = −4.84 + 0.92 × 1.094 = +1.006 + 0.528 × 0.992 = +0.524 + 0.404 × 1.321 = +0.534 + 0.892 × 1.069 = +0.953 + 0.115 × 1.551 = +0.178 − 0.172 × 0.000 = -0.000 + 4.679 × -0.030 = -0.139 − 0.327 × 0.953 = -0.312 = -2.09
Threshold: >-1.78 flags possible manipulation. >-1.49 is the original Beneish (1999) threshold.
Altman Z-Score1.63
Bankruptcy / financial-distress index. Distress correlates with stronger incentive to manage earnings.
Z = 1.2·X1 + 1.4·X2 + 3.3·X3 + 0.6·X4 + 1.0·X5 X1 = (Current Assets − Current Liabilities) / Total Assets [working capital] X2 = Retained Earnings / Total Assets [accumulated profitability] X3 = EBIT / Total Assets [operating efficiency] X4 = Market Cap / Total Liabilities [solvency] X5 = Revenue / Total Assets [asset turnover]
Threshold: Z < 1.81 = distress zone, 1.81–2.99 = grey zone, >2.99 = safe.
Note: this build uses Equity/Assets as a proxy for X2 (no retained-earnings concept pulled) and 0 for X4 (no price feed wired in yet), so absolute Z values are biased; rankings are still meaningful.
Dechow F-Score0.43
Probability of a material misstatement, trained on SEC Accounting and Auditing Enforcement Releases (Dechow et al. 2011, Model 1).
predicted = −7.893 + 0.790·RSST_accruals + 2.518·ΔReceivables + 1.191·ΔInventory + 1.979·%SoftAssets + 0.171·%ΔRevenue − 0.932·ΔROA prob = 1 / (1 + exp(−predicted)) F-Score = prob / 0.0037 (unconditional rate of misstatement)
Threshold: F > 1 = above average risk; > 2.45 = high risk; > 4.62 = very high risk.
Piotroski F-Score6 / 9
Sums 9 binary indicators of fundamental health. Higher is better.
+1 if Net Income > 0 +1 if CFO > 0 +1 if ΔROA > 0 +1 if CFO > Net Income (accrual quality) +1 if Δ(LongTermDebt/TA) < 0 +1 if Δ(CurrentRatio) > 0 +1 if shares outstanding did not rise +1 if Δ(GrossMargin) > 0 +1 if Δ(AssetTurnover) > 0
Threshold: 0–3 = weak, 4–6 = average, 7–9 = strong.
Montier C-Score3 / 6
Six binary fraud screens (Montier 2008). Higher = more flags fired simultaneously.
+1 if Net Income > CFO (earnings exceed cash) +1 if Days Sales Outstanding rising +1 if Days Sales of Inventory rising +1 if (Other current assets / TA) rising +1 if Depreciation/PP&E declining +1 if Total assets growing >10% YoY (acquisition-fueled growth)
Threshold: ≥4 of 6 is the warning band.
DSRI · Days Sales Receivable Index1.094
Year-over-year change in (Receivables / Sales). Rising means collections slowing — a classic revenue-recognition red flag.
DSRI = (AR_t / Sales_t) ÷ (AR_t-1 / Sales_t-1)
Threshold: >1.31 in Beneish's original sample.
GMI · Gross Margin Index0.992
Inverse-direction: prior gross margin divided by current. >1 means margins deteriorated.
GMI = ((Sales_t-1 − COGS_t-1) / Sales_t-1) ÷ ((Sales_t − COGS_t) / Sales_t)
Threshold: >1.20 raises pressure to manage earnings.
AQI · Asset Quality Index1.321
Tracks change in soft (non-current, non-PP&E) assets as a share of total. Rising = intangibles, deferred costs, or capitalized expenses growing fast.
AQI = (1 − (CurrentAssets_t + PPE_t) / TA_t) ÷ (1 − (CurrentAssets_t-1 + PPE_t-1) / TA_t-1)
Threshold: >1.20.
SGI · Sales Growth Index1.069
Simply revenue growth. Aggressive growth alone isn't fraud, but pairs with other flags.
SGI = Sales_t / Sales_t-1
Watch above 1.50 in combination with DSRI/TATA.
DEPI · Depreciation Index1.551
Prior depreciation rate divided by current. >1 means depreciation slowed — useful lives may have been extended to suppress expense.
DEPI = (Dep_t-1 / (Dep_t-1 + PPE_t-1)) ÷ (Dep_t / (Dep_t + PPE_t))
Threshold: >1.10.
SGAI · SG&A Index0.000
Change in SG&A as a fraction of sales.
SGAI = (SGA_t / Sales_t) ÷ (SGA_t-1 / Sales_t-1)
Sharp moves either direction can signal one-time charges or aggressive capitalization.
LVGI · Leverage Index0.953
Change in (Total Liabilities / Total Assets). Rising leverage increases covenant pressure.
LVGI = (TL_t / TA_t) ÷ (TL_t-1 / TA_t-1)
Threshold: >1.20 in combination with weak earnings quality.
TATA · Total Accruals to Total Assets-0.030
Net income that didn't show up as cash, scaled by assets. The Beneish formulation.
TATA = (NetIncome_t − CFO_t) / TotalAssets_t
Threshold: >0.03 is the classic Sloan accruals red flag; the higher and more sustained, the worse.
Sloan accruals ratio-0.033
The original Sloan (1996) ratio: same numerator, scaled by *average* assets.
Accruals ratio = (NI_t − CFO_t) / ((TA_t + TA_t-1) / 2)
High-accrual firms historically underperform low-accrual firms by 10%+ annually.
CFO − Net Income gap0.210
Operating cash flow minus net income, scaled by |NI|. Strongly negative = NI > CFO, which is the highest-conviction earnings-quality red flag.
gap = (CFO_t − NI_t) / (|NI_t| + 1)
Threshold: < −0.30.
Revenue − A/R growth gap-0.100
Revenue YoY growth minus receivables YoY growth, in decimal points. Negative = receivables outpacing sales.
gap = (Rev_t − Rev_t-1)/Rev_t-1 − (AR_t − AR_t-1)/AR_t-1
Threshold: < −0.10. Suggests bill-and-hold, channel stuffing, or collection deterioration.
Revenue − Inventory growth gap0.570
Revenue YoY growth minus inventory YoY growth.
gap = (Rev_t − Rev_t-1)/Rev_t-1 − (Inv_t − Inv_t-1)/Inv_t-1
Threshold: < −0.10. Inventory build outpacing demand → future write-down risk.
Goodwill / Total Assets0.133
Share of the balance sheet attributable to past acquisition premiums.
GW/TA = Goodwill_t / TotalAssets_t
Threshold: >0.40 = acquisition-heavy; impairment risk is elevated when cash flow softens.

Composite scores over time

Earnings quality signals

Triggered red flags (4)

SeverityCodeHeadlineDetail
high Z_SCORE Altman Z-Score 1.63 indicates distress Distress correlates with stronger incentive to manage earnings.
medium AQI Asset Quality Index 1.32 Soft assets (intangibles, deferrals) growing faster than hard assets.
medium DEPI Depreciation Index 1.55 Useful lives may have been extended to suppress depreciation expense.
medium REV_AR Revenue grew -10pp slower than receivables Sales not converting to cash — bill-and-hold or extended terms suspected.

Rule-based narrative

MICROSOFT CORP (MSFT) FY2025 — 4 flags (1 high, 3 medium, 0 low).

Flags are scattered rather than forming a single textbook pattern. Review each finding individually before drawing conclusions.

Triggered findings:
- [HIGH] Altman Z-Score 1.63 indicates distress — Distress correlates with stronger incentive to manage earnings.
- [MEDIUM] Asset Quality Index 1.32 — Soft assets (intangibles, deferrals) growing faster than hard assets.
- [MEDIUM] Depreciation Index 1.55 — Useful lives may have been extended to suppress depreciation expense.
- [MEDIUM] Revenue grew -10pp slower than receivables — Sales not converting to cash — bill-and-hold or extended terms suspected.

Claude analysis

Click "Generate" to call Claude. Findings JSON is sent as structured input; the model is instructed to explain plausible narratives without inventing facts.