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Brown-Forman Corp (NYSE:BF.B)
Beneish M-Score
-2.57 (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 -2.57 suggests that the company is not a manipulator.

BF.B' s 10-Year Beneish M-Score Range
Min: -3.26   Max: -1.78
Current: -2.57

-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 -2.48.


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 * 0.8881+0.528 * 1+0.404 * 0.94+0.892 * 1.0395+0.115 * 1.1188
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9577+4.679 * 0.0111-0.327 * 1.2196
=-2.57

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

This Year (Jul15) TTM:Last Year (Jul14) TTM:
Accounts Receivable was $505 Mil.
Revenue was 699 + 739 + 813 + 877 = $3,128 Mil.
Gross Profit was 491 + 526 + 553 + 609 = $2,179 Mil.
Total Current Assets was $2,371 Mil.
Total Assets was $4,334 Mil.
Property, Plant and Equipment(Net PPE) was $608 Mil.
Depreciation, Depletion and Amortization(DDA) was $51 Mil.
Selling, General & Admin. Expense(SGA) was $1,128 Mil.
Total Current Liabilities was $833 Mil.
Long-Term Debt was $1,229 Mil.
Net Income was 156 + 141 + 186 + 208 = $691 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 147 + 233 + 305 + -42 = $643 Mil.
Accounts Receivable was $547 Mil.
Revenue was 705 + 689 + 782 + 833 = $3,009 Mil.
Gross Profit was 495 + 493 + 532 + 576 = $2,096 Mil.
Total Current Assets was $2,259 Mil.
Total Assets was $4,191 Mil.
Property, Plant and Equipment(Net PPE) was $538 Mil.
Depreciation, Depletion and Amortization(DDA) was $51 Mil.
Selling, General & Admin. Expense(SGA) was $1,133 Mil.
Total Current Liabilities was $637 Mil.
Long-Term Debt was $998 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)
=(505 / 3128) / (547 / 3009)
=0.16144501 / 0.18178797
=0.8881

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)
=(526 / 3009) / (491 / 3128)
=0.69657694 / 0.69661125
=1

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 - (2371 + 608) / 4334) / (1 - (2259 + 538) / 4191)
=0.31264421 / 0.33261751
=0.94

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
=3128 / 3009
=1.0395

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 + 538)) / (51 / (51 + 608))
=0.08658744 / 0.07738998
=1.1188

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)
=(1128 / 3128) / (1133 / 3009)
=0.36061381 / 0.37653706
=0.9577

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)
=((1229 + 833) / 4334) / ((998 + 637) / 4191)
=0.47577296 / 0.39012169
=1.2196

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
=(691 - 0 - 643) / 4334
=0.0111

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 -2.57 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

Apr06Apr07Apr08Apr09Apr10Apr11Apr12Apr13Apr14Apr15
DSRI 0.9981.09630.96320.84311.14451.13290.68531.46350.9890.9779
GMI 0.96631.00771.01711.03280.97420.97871.34220.72380.98770.9974
AQI 0.73571.56081.0710.95961.00550.88181.05650.97770.91310.9457
SGI 1.09341.14091.16410.96090.99521.04741.39750.78831.04981.0478
DEPI 1.03711.12420.85080.91980.91310.89761.14031.07441.17271.0842
SGAI 1.01590.99380.96330.96220.95951.00950.7651.33541.01010.9646
LVGI 0.90131.48040.82590.94070.8051.04710.79961.55410.93661.0715
TATA -0.02570.0042-0.0276-0.0104-0.03040.0121-0.00090.01490.00240.0181
M-score -2.61-2.16-2.41-2.69-2.44-2.35-2.09-2.56-2.44-2.40

Brown-Forman Corp Quarterly Data

Apr13Jul13Oct13Jan14Apr14Jul14Oct14Jan15Apr15Jul15
DSRI 1.2641.28121.49441.49531.14541.04191.00030.89210.97750.8881
GMI 0.8380.7530.65980.67180.85280.90950.98990.99070.99771
AQI 0.97770.99921.00410.98350.91310.89750.92970.95410.94570.94
SGI 0.91270.8060.71580.71650.90650.96871.04361.04171.04821.0395
DEPI 1.07441.04151.05161.07641.17271.16511.14481.10591.08421.1188
SGAI 1.15381.31521.47311.44081.17071.08641.02641.02260.96250.9577
LVGI 1.55411.50221.49710.85180.93660.95110.99640.96381.07151.2196
TATA 0.01490.0120.01190.01980.0024-0.00050.03540.01030.01840.0111
M-score -2.54-2.68-2.64-2.38-2.52-2.54-2.30-2.50-2.40-2.57
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