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Brown-Forman Corporation (NYSE:BF.B)
Beneish M-Score
-2.27 (As of Today)

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.

Brown-Forman Corporation has a M-score of -2.27 suggests that the company is not a manipulator.

BF.B' s 10-Year Beneish M-Score Range
Min: -3.26   Max: -1.78
Current: -2.27

-3.26
-1.78

During the past 13 years, the highest Beneish M-Score of Brown-Forman Corporation was -1.78. The lowest was -3.26. And the median was -2.47.


Definition

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 Brown-Forman Corporation 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 * 1.0103+0.528 * 0.9944+0.404 * 0.9835+0.892 * 1.0604+0.115 * 1.0725
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9737+4.679 * 0.0198-0.327 * 0.8518
=-2.27

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jan14) TTM:Last Year (Jan13) TTM:
Accounts Receivable was $679 Mil.
Revenue was 782 + 833 + 686 + 660 = $2,961 Mil.
Gross Profit was 532 + 576 + 477 + 460 = $2,045 Mil.
Total Current Assets was $2,103 Mil.
Total Assets was $3,993 Mil.
Property, Plant and Equipment(Net PPE) was $497 Mil.
Depreciation, Depletion and Amortization(DDA) was $51 Mil.
Selling, General & Admin. Expense(SGA) was $1,088 Mil.
Total Current Liabilities was $604 Mil.
Long-Term Debt was $997 Mil.
Net Income was 177 + 206 + 143 + 113 = $639 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 189 + 108 + 93 + 170 = $560 Mil.
Accounts Receivable was $634 Mil.
Revenue was 747 + 777 + 666 + 602.4 = $2,792 Mil.
Gross Profit was 507 + 525 + 464 + 421.8 = $1,918 Mil.
Total Current Assets was $2,046 Mil.
Total Assets was $3,832 Mil.
Property, Plant and Equipment(Net PPE) was $427 Mil.
Depreciation, Depletion and Amortization(DDA) was $47 Mil.
Selling, General & Admin. Expense(SGA) was $1,054 Mil.
Total Current Liabilities was $807 Mil.
Long-Term Debt was $997 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(679 / 2961) / (633.8 / 2792.4)
=0.22931442 / 0.22697321
=1.0103

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(576 / 2792.4) / (532 / 2961)
=0.68679272 / 0.69064505
=0.9944

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (2103 + 497) / 3993) / (1 - (2046.4 + 426.6) / 3832.3)
=0.34886051 / 0.35469561
=0.9835

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=2961 / 2792.4
=1.0604

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))
=(47.3 / (47.3 + 426.6)) / (51 / (51 + 497))
=0.09981009 / 0.09306569
=1.0725

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)
=(1088 / 2961) / (1053.8 / 2792.4)
=0.36744343 / 0.37738146
=0.9737

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)
=((997 + 604) / 3993) / ((996.6 + 807.3) / 3832.3)
=0.40095167 / 0.4707095
=0.8518

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(639 - 0 - 560) / 3993
=0.0198

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.

Brown-Forman Corporation has a M-score of -2.27 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Brown-Forman Corporation Annual Data

Apr04Apr05Apr06Apr07Apr08Apr09Apr10Apr11Apr12Apr13
DSRI 1.33070.79220.9981.09630.96320.84311.14451.13290.90951.1027
GMI 0.91740.96130.96631.00771.01711.03280.97420.97871.01130.9606
AQI 1.07441.0560.73571.56081.0710.95961.00550.88181.05650.9777
SGI 0.80471.07371.09341.14091.16410.96090.99521.04741.0531.0463
DEPI 1.30020.80841.03711.12420.85080.91980.91310.89761.14031.0744
SGAI 0.99481.02171.01590.99380.96330.96220.95951.00951.01541.0062
LVGI 0.80880.8880.90131.48040.82590.94070.8051.04710.79961.5541
TATA -0.0194-0.0612-0.02570.0042-0.0276-0.0104-0.02840.0121-0.00090.0149
M-score -2.36-2.88-2.61-2.16-2.41-2.69-2.43-2.35-2.41-2.48

Brown-Forman Corporation Quarterly Data

Oct11Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14
DSRI 0.91770.85970.78420.96041.2261.26351.27841.07351.00431.0103
GMI 1.15561.16561.1731.00290.84130.8260.82810.89820.98170.9944
AQI 0.90810.92521.05651.03030.95710.97460.97770.99921.00410.9835
SGI 1.28571.24751.22121.04440.8660.88210.90250.96191.06521.0604
DEPI 0.95430.98091.14031.16131.19471.16711.07441.06051.06721.0725
SGAI 0.84190.85980.87561.0111.20051.19931.16661.1030.99040.9737
LVGI 1.11990.98620.79960.80490.7741.4081.55411.50221.49710.8518
TATA 0.02110.0287-0.00080.00080.00840.01040.01460.01170.01180.0198
M-score -2.17-2.17-2.27-2.38-2.39-2.54-2.54-2.62-2.52-2.27
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