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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 20.72. The lowest was -3.87. And the median was -2.70.
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 * 0.9548||+||0.528 * 1.0137||+||0.404 * 1.0207||+||0.892 * 0.8855||+||0.115 * 0.917|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0132||+||4.679 * -0.1043||-||0.327 * 1.3023|
|This Year (Apr15) TTM:||Last Year (Apr14) TTM:|
|Accounts Receivable was $59 Mil.|
Revenue was 709.422 + 1119.544 + 911.453 + 890.605 = $3,631 Mil.
Gross Profit was 411.549 + 681.885 + 567.07 + 552.956 = $2,213 Mil.
Total Current Assets was $1,047 Mil.
Total Assets was $2,365 Mil.
Property, Plant and Equipment(Net PPE) was $950 Mil.
Depreciation, Depletion and Amortization(DDA) was $221 Mil.
Selling, General & Admin. Expense(SGA) was $2,120 Mil.
Total Current Liabilities was $438 Mil.
Long-Term Debt was $340 Mil.
Net Income was -63.246 + 44.388 + 18.227 + 12.877 = $12 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -93.783 + 283.016 + 53.794 + 15.81 = $259 Mil.
|Accounts Receivable was $70 Mil.
Revenue was 822.428 + 1299.137 + 1033.293 + 945.698 = $4,101 Mil.
Gross Profit was 511.659 + 767.106 + 651.04 + 604.122 = $2,534 Mil.
Total Current Assets was $1,053 Mil.
Total Assets was $2,566 Mil.
Property, Plant and Equipment(Net PPE) was $1,122 Mil.
Depreciation, Depletion and Amortization(DDA) was $235 Mil.
Selling, General & Admin. Expense(SGA) was $2,363 Mil.
Total Current Liabilities was $470 Mil.
Long-Term Debt was $178 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)|
|=||(59.169 / 3631.024)||/||(69.983 / 4100.556)|
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)|
|=||(681.885 / 4100.556)||/||(411.549 / 3631.024)|
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 - (1046.742 + 949.587) / 2364.592)||/||(1 - (1053.026 + 1121.777) / 2566.393)|
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))|
|=||(234.678 / (234.678 + 1121.777))||/||(220.815 / (220.815 + 949.587))|
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)|
|=||(2119.891 / 3631.024)||/||(2362.717 / 4100.556)|
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)|
|=||((340.103 + 437.503) / 2364.592)||/||((177.941 + 470.102) / 2566.393)|
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|
|=||(12.246 - 0||-||258.837)||/||2364.592|
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 -3.21 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