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Brown-Forman Corp (NYSE:BF.B)
Beneish M-Score
-2.44 (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 Corp has a M-score of -2.44 suggests that the company is not a manipulator.

BF.B' s 10-Year Beneish M-Score Range
Min: -3.26   Max: -1.78
Current: -2.44

-3.26
-1.78

During the past 13 years, the highest Beneish M-Score of Brown-Forman Corp 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 Corp 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 * 0.9897+0.528 * 0.9875+0.404 * 0.9131+0.892 * 1.0491+0.115 * 1.1727
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0117+4.679 * 0.0024-0.327 * 0.9366
=-2.44

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

This Year (Apr14) TTM:Last Year (Apr13) TTM:
Accounts Receivable was $569 Mil.
Revenue was 689 + 782 + 833 + 686 = $2,990 Mil.
Gross Profit was 493 + 532 + 576 + 477 = $2,078 Mil.
Total Current Assets was $2,177 Mil.
Total Assets was $4,103 Mil.
Property, Plant and Equipment(Net PPE) was $526 Mil.
Depreciation, Depletion and Amortization(DDA) was $50 Mil.
Selling, General & Admin. Expense(SGA) was $1,123 Mil.
Total Current Liabilities was $561 Mil.
Long-Term Debt was $997 Mil.
Net Income was 133 + 177 + 206 + 143 = $659 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 259 + 189 + 108 + 93 = $649 Mil.
Accounts Receivable was $548 Mil.
Revenue was 660 + 747 + 777 + 666 = $2,850 Mil.
Gross Profit was 460 + 507 + 525 + 464 = $1,956 Mil.
Total Current Assets was $1,821 Mil.
Total Assets was $3,626 Mil.
Property, Plant and Equipment(Net PPE) was $450 Mil.
Depreciation, Depletion and Amortization(DDA) was $51 Mil.
Selling, General & Admin. Expense(SGA) was $1,058 Mil.
Total Current Liabilities was $473 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)
=(569 / 2990) / (548 / 2850)
=0.190301 / 0.1922807
=0.9897

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)
=(532 / 2850) / (493 / 2990)
=0.68631579 / 0.69498328
=0.9875

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 - (2177 + 526) / 4103) / (1 - (1821 + 450) / 3626)
=0.34121375 / 0.37369002
=0.9131

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
=2990 / 2850
=1.0491

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))
=(51 / (51 + 450)) / (50 / (50 + 526))
=0.10179641 / 0.08680556
=1.1727

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)
=(1123 / 2990) / (1058 / 2850)
=0.37558528 / 0.37122807
=1.0117

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 + 561) / 4103) / ((997 + 473) / 3626)
=0.37972215 / 0.40540541
=0.9366

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
=(659 - 0 - 649) / 4103
=0.0024

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 Corp has a M-score of -2.44 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 Corp Annual Data

Apr05Apr06Apr07Apr08Apr09Apr10Apr11Apr12Apr13Apr14
DSRI 0.79220.9981.09630.96320.84311.14451.13290.90951.10270.989
GMI 0.96130.96631.00771.01711.03280.97420.97871.01130.96060.9877
AQI 1.0560.73571.56081.0710.95961.00550.88181.05650.97770.9131
SGI 1.07371.09341.14091.16410.96090.99521.04741.0531.04631.0498
DEPI 0.80841.03711.12420.85080.91980.91310.89761.14031.07441.1727
SGAI 1.02171.01590.99380.96330.96220.95951.00951.01541.00621.0101
LVGI 0.8880.90131.48040.82590.94070.8051.04710.79961.55410.9366
TATA -0.0612-0.02570.0042-0.0276-0.0104-0.02840.0121-0.00090.01490.0024
M-score -2.88-2.61-2.16-2.41-2.69-2.43-2.35-2.41-2.48-2.44

Brown-Forman Corp Quarterly Data

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
DSRI 0.85970.78420.96041.2261.26351.27841.07351.00431.01030.9897
GMI 1.16561.1731.00290.84130.8260.82810.89820.98170.99440.9875
AQI 0.92521.05651.03030.95710.97460.97770.99921.00410.98350.9131
SGI 1.24751.22121.04440.8660.88210.90250.96191.06521.06041.0491
DEPI 0.98091.14031.16131.19471.16711.07441.06051.06721.07251.1727
SGAI 0.85980.87561.0111.20051.19931.16661.1030.99040.97371.0117
LVGI 0.98620.79960.80490.7741.4081.55411.50221.49710.85180.9366
TATA 0.0287-0.00080.00080.00840.01040.01460.01170.01180.01980.0024
M-score -2.17-2.27-2.38-2.39-2.54-2.54-2.62-2.52-2.27-2.44
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