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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.
Brown-Forman Corporation has a M-score of -2.27 suggests that the company is not a manipulator.
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.
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|
|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
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)|
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)|
|=||(576 / 2792.4)||/||(532 / 2961)|
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 - (2103 + 497) / 3993)||/||(1 - (2046.4 + 426.6) / 3832.3)|
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))|
|=||(47.3 / (47.3 + 426.6))||/||(51 / (51 + 497))|
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)|
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)|
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|
|=||(639 - 0||-||560)||/||3993|
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.
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
Brown-Forman Corporation Annual Data
Brown-Forman Corporation Quarterly Data