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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.
Sothebys has a M-score of -2.23 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Sothebys was -1.10. The lowest was -3.52. And the median was -2.36.
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 Sothebys 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 * 0.9182||+||0.528 * 1.0506||+||0.404 * 1.1665||+||0.892 * 1.2264||+||0.115 * 0.9297|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8926||+||4.679 * 0.0164||-||0.327 * 1.1764|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $993.3 Mil.|
Revenue was 335.817 + 156.811 + 339.201 + 107.864 = $939.7 Mil.
Gross Profit was 294.658 + 121.162 + 298.403 + 78.168 = $792.4 Mil.
Total Current Assets was $2,011.1 Mil.
Total Assets was $3,073.0 Mil.
Property, Plant and Equipment(Net PPE) was $373.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $20.3 Mil.
Selling, General & Admin. Expense(SGA) was $500.0 Mil.
Total Current Liabilities was $1,251.9 Mil.
Long-Term Debt was $860.0 Mil.
Net Income was 77.632 + -6.114 + 90.753 + -30.131 = $132.1 Mil.
Non Operating Income was 0.694 + -1.442 + 0.516 + 0.982 = $0.8 Mil.
Cash Flow from Operations was 204.573 + -268.132 + 291.94 + -147.425 = $81.0 Mil.
|Accounts Receivable was $882.1 Mil.
Revenue was 304.868 + 101.745 + 291.123 + 68.461 = $766.2 Mil.
Gross Profit was 269.61 + 92.596 + 254.888 + 61.683 = $678.8 Mil.
Total Current Assets was $1,845.5 Mil.
Total Assets was $2,743.4 Mil.
Property, Plant and Equipment(Net PPE) was $371.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $18.7 Mil.
Selling, General & Admin. Expense(SGA) was $456.8 Mil.
Total Current Liabilities was $1,087.5 Mil.
Long-Term Debt was $515.2 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)|
|=||(993.302 / 939.693)||/||(882.097 / 766.197)|
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)|
|=||(121.162 / 766.197)||/||(294.658 / 939.693)|
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 - (2011.133 + 373.476) / 3073.001)||/||(1 - (1845.528 + 371.013) / 2743.35)|
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))|
|=||(18.705 / (18.705 + 371.013))||/||(20.331 / (20.331 + 373.476))|
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)|
|=||(500.039 / 939.693)||/||(456.757 / 766.197)|
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)|
|=||((860.031 + 1251.88) / 3073.001)||/||((515.18 + 1087.476) / 2743.35)|
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|
|=||(132.14 - 0.75||-||80.956)||/||3073.001|
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.
Sothebys has a M-score of -2.23 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
Sothebys Annual Data
Sothebys Quarterly Data