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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 Brown-Forman Corp 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 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 * 0.8922||+||0.528 * 0.9907||+||0.404 * 0.9541||+||0.892 * 1.0415||+||0.115 * 1.1078|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0228||+||4.679 * 0.0103||-||0.327 * 0.9638|
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $631 Mil.|
Revenue was 813 + 877 + 705 + 689 = $3,084 Mil.
Gross Profit was 553 + 609 + 495 + 493 = $2,150 Mil.
Total Current Assets was $2,209 Mil.
Total Assets was $4,161 Mil.
Property, Plant and Equipment(Net PPE) was $567 Mil.
Depreciation, Depletion and Amortization(DDA) was $52 Mil.
Selling, General & Admin. Expense(SGA) was $1,159 Mil.
Total Current Liabilities was $860 Mil.
Long-Term Debt was $748 Mil.
Net Income was 186 + 208 + 150 + 133 = $677 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 305 + -42 + 112 + 259 = $634 Mil.
|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.
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)|
|=||(631 / 3084)||/||(679 / 2961)|
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)|
|=||(609 / 2961)||/||(553 / 3084)|
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 - (2209 + 567) / 4161)||/||(1 - (2103 + 497) / 3993)|
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))|
|=||(51 / (51 + 497))||/||(52 / (52 + 567))|
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)|
|=||(1159 / 3084)||/||(1088 / 2961)|
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)|
|=||((748 + 860) / 4161)||/||((997 + 604) / 3993)|
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|
|=||(677 - 0||-||634)||/||4161|
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 -2.50 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 Corp Annual Data
Brown-Forman Corp Quarterly Data