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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.
During the past 13 years, the highest Beneish M-Score of Abercrombie & Fitch Co was 20.74. The lowest was -3.70. And the median was -2.72.
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 Abercrombie & Fitch Co 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 * 1.1436||+||0.528 * 1.0078||+||0.404 * 0.9929||+||0.892 * 0.9398||+||0.115 * 0.9837|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0211||+||4.679 * -0.1128||-||0.327 * 1.0801|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $57 Mil.|
Revenue was 1112.93 + 878.572 + 817.756 + 709.422 = $3,519 Mil.
Gross Profit was 676.345 + 559.787 + 509.862 + 411.549 = $2,158 Mil.
Total Current Assets was $1,179 Mil.
Total Assets was $2,433 Mil.
Property, Plant and Equipment(Net PPE) was $894 Mil.
Depreciation, Depletion and Amortization(DDA) was $214 Mil.
Selling, General & Admin. Expense(SGA) was $2,075 Mil.
Total Current Liabilities was $535 Mil.
Long-Term Debt was $334 Mil.
Net Income was 57.741 + 41.891 + -0.81 + -63.246 = $36 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 243.401 + 87.293 + 73.03 + -93.783 = $310 Mil.
|Accounts Receivable was $53 Mil.
Revenue was 1119.544 + 911.453 + 890.605 + 822.428 = $3,744 Mil.
Gross Profit was 681.885 + 567.07 + 552.956 + 511.659 = $2,314 Mil.
Total Current Assets was $1,165 Mil.
Total Assets was $2,505 Mil.
Property, Plant and Equipment(Net PPE) was $967 Mil.
Depreciation, Depletion and Amortization(DDA) was $226 Mil.
Selling, General & Admin. Expense(SGA) was $2,162 Mil.
Total Current Liabilities was $486 Mil.
Long-Term Debt was $342 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(56.868 / 3518.68)||/||(52.91 / 3744.03)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(559.787 / 3744.03)||/||(676.345 / 3518.68)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (1178.98 + 894.178) / 2433.039)||/||(1 - (1164.972 + 967.001) / 2505.167)|
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.
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))|
|=||(226.421 / (226.421 + 967.001))||/||(213.68 / (213.68 + 894.178))|
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)|
|=||(2074.535 / 3518.68)||/||(2161.872 / 3744.03)|
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)|
|=||((333.675 + 534.703) / 2433.039)||/||((341.831 + 485.956) / 2505.167)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(35.576 - 0||-||309.941)||/||2433.039|
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.
Abercrombie & Fitch Co has a M-score of -2.96 suggests that the company will not be a manipulator.
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
Abercrombie & Fitch Co Annual Data
Abercrombie & Fitch Co Quarterly Data