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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.
Z-scores are an example of standard scores as they are expressed relative to a mean of 0 and a standard deviation of 1. Another standard score is I.Q. which has a mean of 100 and a standard deviation of 15. The mathematical definition of the Z-score is.