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Sothebys (NYSE:BID)
Beneish M-Score
-2.24 (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.

Sothebys has a M-score of -2.24 suggests that the company is not a manipulator.

BID' s 10-Year Beneish M-Score Range
Min: -3.44   Max: -1.35
Current: -2.24

-3.44
-1.35

During the past 13 years, the highest Beneish M-Score of Sothebys was -1.35. The lowest was -3.44. And the median was -2.33.


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 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 * 0.9043+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
=-2.24

* 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 $1,090.2 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 $982.9 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

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)
=(1090.185 / 939.693) / (982.933 / 766.197)
=1.16015018 / 1.28287242
=0.9043

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)
=(121.162 / 766.197) / (294.658 / 939.693)
=0.88590402 / 0.84324455
=1.0506

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 - (2011.133 + 373.476) / 3073.001) / (1 - (1845.528 + 371.013) / 2743.35)
=0.22401294 / 0.19203128
=1.1665

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
=939.693 / 766.197
=1.2264

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))
=0.04799624 / 0.05162681
=0.9297

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)
=0.53213017 / 0.5961352
=0.8926

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)
=0.68724709 / 0.58419669
=1.1764

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
=(132.14 - 0.75 - 80.956) / 3073.001
=0.0164

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 -2.24 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.

Sothebys Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.95110.91020.95231.27480.99770.88731.10690.73281.28341.2094
GMI 0.96391.00150.99021.04291.11190.89830.96711.00141.00091.025
AQI 0.62281.11220.98170.83711.20321.12851.04570.85661.46950.9117
SGI 1.56631.03381.29381.38040.75360.70131.59671.07430.92391.1108
DEPI 0.98691.03681.02561.11750.84091.9541.29860.93480.99290.9369
SGAI 0.75521.03320.93510.92611.20471.08040.75511.03991.09380.9952
LVGI 1.34051.10090.89370.92750.92520.98011.02890.96090.96520.9967
TATA -0.04910.0062-0.10880.11330.12-0.1057-0.0814-0.09540.0721-0.0382
M-score -2.49-2.49-2.73-1.35-2.03-3.24-2.16-3.16-1.77-2.40

Sothebys Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.80631.08281.46541.28341.43570.9750.70041.20940.98220.9043
GMI 0.99081.00471.00531.00091.00490.99731.03211.0251.05111.0506
AQI 1.04841.29531.24071.46951.09111.14721.12610.91171.02441.1665
SGI 1.03180.85340.87990.92390.93641.01971.05771.11081.18751.2264
DEPI 0.76680.91330.94510.99290.96680.95390.96670.93690.92540.9297
SGAI 1.08281.19021.15931.09371.07871.00910.97990.9860.89680.8926
LVGI 0.87310.9361.02590.96521.18230.99160.82970.99671.09741.1764
TATA -0.00810.02890.09110.0721-0.0297-0.0473-0.0987-0.03820.00510.0164
M-score -2.65-2.30-1.67-1.77-2.31-2.65-3.04-2.39-2.29-2.24
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