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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 20.69. The lowest was -3.98. And the median was -2.78.
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 * 1.1876||+||0.528 * 0.9992||+||0.404 * 1.012||+||0.892 * 0.9654||+||0.115 * 0.9629|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0071||+||4.679 * -0.1078||-||0.327 * 0.9429|
|This Year (Oct16) TTM:||Last Year (Oct15) TTM:|
|Accounts Receivable was $71 Mil.|
Revenue was 821.734 + 783.16 + 685.483 + 1112.93 = $3,403 Mil.
Gross Profit was 510.739 + 477.107 + 425.721 + 676.345 = $2,090 Mil.
Total Current Assets was $1,150 Mil.
Total Assets was $2,336 Mil.
Property, Plant and Equipment(Net PPE) was $828 Mil.
Depreciation, Depletion and Amortization(DDA) was $200 Mil.
Selling, General & Admin. Expense(SGA) was $2,026 Mil.
Total Current Liabilities was $526 Mil.
Long-Term Debt was $334 Mil.
Net Income was 7.881 + -13.129 + -39.587 + 57.741 = $13 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 79.237 + 18.424 + -76.283 + 243.401 = $265 Mil.
|Accounts Receivable was $62 Mil.
Revenue was 878.572 + 817.756 + 709.422 + 1119.544 = $3,525 Mil.
Gross Profit was 559.787 + 509.862 + 411.549 + 681.885 = $2,163 Mil.
Total Current Assets was $1,213 Mil.
Total Assets was $2,513 Mil.
Property, Plant and Equipment(Net PPE) was $919 Mil.
Depreciation, Depletion and Amortization(DDA) was $212 Mil.
Selling, General & Admin. Expense(SGA) was $2,084 Mil.
Total Current Liabilities was $644 Mil.
Long-Term Debt was $336 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)|
|=||(71.235 / 3403.307)||/||(62.132 / 3525.294)|
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)|
|=||(2163.083 / 3525.294)||/||(2089.912 / 3403.307)|
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 - (1150.271 + 827.996) / 2336.468)||/||(1 - (1213.155 + 918.926) / 2512.744)|
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))|
|=||(211.819 / (211.819 + 918.926))||/||(199.982 / (199.982 + 827.996))|
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)|
|=||(2025.802 / 3403.307)||/||(2083.704 / 3525.294)|
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)|
|=||((333.839 + 526.122) / 2336.468)||/||((336.461 + 644.41) / 2512.744)|
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|
|=||(12.906 - 0||-||264.779)||/||2336.468|
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 -2.83 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