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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 -2.45.
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 * 0.9775||+||0.528 * 0.9977||+||0.404 * 0.9457||+||0.892 * 1.0482||+||0.115 * 1.0842|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9625||+||4.679 * 0.0184||-||0.327 * 1.0715|
|This Year (Apr15) TTM:||Last Year (Apr14) TTM:|
|Accounts Receivable was $583 Mil.|
Revenue was 739 + 813 + 877 + 705 = $3,134 Mil.
Gross Profit was 526 + 553 + 609 + 495 = $2,183 Mil.
Total Current Assets was $2,254 Mil.
Total Assets was $4,193 Mil.
Property, Plant and Equipment(Net PPE) was $586 Mil.
Depreciation, Depletion and Amortization(DDA) was $51 Mil.
Selling, General & Admin. Expense(SGA) was $1,133 Mil.
Total Current Liabilities was $958 Mil.
Long-Term Debt was $748 Mil.
Net Income was 141 + 186 + 208 + 150 = $685 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 233 + 305 + -42 + 112 = $608 Mil.
|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.
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)|
|=||(583 / 3134)||/||(569 / 2990)|
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)|
|=||(553 / 2990)||/||(526 / 3134)|
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 - (2254 + 586) / 4193)||/||(1 - (2177 + 526) / 4103)|
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))|
|=||(50 / (50 + 526))||/||(51 / (51 + 586))|
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)|
|=||(1133 / 3134)||/||(1123 / 2990)|
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 + 958) / 4193)||/||((997 + 561) / 4103)|
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|
|=||(685 - 0||-||608)||/||4193|
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 -2.40 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