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Brown-Forman Corp (NYSE:BF.B)
Beneish M-Score
-2.49 (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 -2.49 suggests that the company is not a manipulator.

BF.B' s 10-Year Beneish M-Score Range
Min: -2.99   Max: -1.87
Current: -2.49

-2.99
-1.87

During the past 13 years, the highest Beneish M-Score of Brown-Forman Corp was -1.87. The lowest was -2.99. And the median was -2.46.


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 * 0.9624+0.528 * 0.9848+0.404 * 0.8975+0.892 * 1.0486+0.115 * 1.163
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0033+4.679 * -0.0005-0.327 * 0.9511
=-2.49

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

This Year (Jul14) TTM:Last Year (Jul13) TTM:
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.
Net Income was 150 + 133 + 177 + 206 = $666 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 112 + 259 + 189 + 108 = $668 Mil.
Accounts Receivable was $542 Mil.
Revenue was 686 + 659.6 + 746.9 + 777 = $2,870 Mil.
Gross Profit was 477 + 459.7 + 506.7 + 525 = $1,968 Mil.
Total Current Assets was $1,861 Mil.
Total Assets was $3,686 Mil.
Property, Plant and Equipment(Net PPE) was $459 Mil.
Depreciation, Depletion and Amortization(DDA) was $51 Mil.
Selling, General & Admin. Expense(SGA) was $1,077 Mil.
Total Current Liabilities was $515 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)
=(547 / 3009) / (542 / 2869.5)
=0.18178797 / 0.18888308
=0.9624

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)
=(493 / 2869.5) / (495 / 3009)
=0.68597317 / 0.69657694
=0.9848

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 - (2259 + 538) / 4191) / (1 - (1861 + 459) / 3686)
=0.33261751 / 0.37059143
=0.8975

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
=3009 / 2869.5
=1.0486

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))
=(51.4 / (51.4 + 459)) / (51 / (51 + 538))
=0.10070533 / 0.08658744
=1.163

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 / 3009) / (1076.9 / 2869.5)
=0.37653706 / 0.37529186
=1.0033

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)
=((998 + 637) / 4191) / ((997 + 515) / 3686)
=0.39012169 / 0.41020076
=0.9511

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
=(666 - 0 - 668) / 4191
=-0.0005

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 -2.49 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 0.94621.11561.09730.96320.84311.14451.13290.90951.10270.989
GMI 0.96860.90581.00121.01711.03280.97420.97871.01130.96060.9877
AQI 0.93810.82221.57211.0710.95961.00550.88181.05650.97770.9131
SGI 1.04470.85471.12251.16410.96090.99521.04741.0531.04631.0498
DEPI 0.94521.11541.16280.85080.91980.91310.89761.14031.07441.1727
SGAI 1.02670.99670.99380.96330.96220.95951.00951.01541.00621.0101
LVGI 0.89730.89391.47720.82590.94070.8051.04710.79961.55410.9366
TATA -0.0469-0.0260.0042-0.0282-0.0104-0.02840.0121-0.00090.01490.0024
M-score -2.73-2.70-2.17-2.42-2.69-2.43-2.35-2.41-2.48-2.44

Brown-Forman Corp Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
DSRI 0.78420.96041.2261.26351.27861.07371.00441.01040.98950.9624
GMI 1.1731.00290.84130.82610.82820.89830.98180.99430.98740.9848
AQI 1.05651.03030.95710.97460.97770.99921.00410.98350.91310.8975
SGI 1.22121.04440.8660.8820.90230.96171.0651.06031.04931.0486
DEPI 1.14031.16131.19471.15611.06691.05311.05971.08461.18091.163
SGAI 0.87561.0111.20051.19921.16671.10310.99040.97391.01171.0033
LVGI 0.79960.80490.7741.4081.55411.50221.49710.85180.93660.9511
TATA -0.00080.00080.00840.01050.01470.01170.01190.01980.0024-0.0005
M-score -2.27-2.38-2.39-2.55-2.54-2.62-2.52-2.27-2.44-2.49
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