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A mathematical model that uses financial ratios and eight variables to identify whether a company has manipulated its earnings. The variables are constructed from the data in the company's financial statements and, once calculated, create an M-Score to describe the degree to which the earnings have been manipulated.
The z-score, also known as standard score, is a measurement used in statistics. It is the measurement of the number of standard deviations a specific number is above or below a mean. The formula to calculate z-score is. z = (x - Î¼) / Ï. where. 1  z is the z-score, 2  x is the value to be standardized,3  Î¼ is the mean of the given set of data, 4  Ï is the standard deviation of the given set of data.t is the measurement of the number of standard deviations a specific number is above or below a mean. The formula to calculate z-score is. z = (x - Î¼) / Ï. where. 1  z is the z-score, 2  x is the value to be standardized, 3  Î¼ is the mean of the given set of data,