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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 -2.29 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Sothebys was -1.35. The lowest was -3.37. And the median was -2.34.
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 * 0.9822||+||0.528 * 1.0511||+||0.404 * 1.0244||+||0.892 * 1.1875||+||0.115 * 0.9254|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9052||+||4.679 * 0.0051||-||0.327 * 1.0974|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $686.3 Mil.|
Revenue was 156.811 + 339.201 + 107.864 + 304.868 = $908.7 Mil.
Gross Profit was 121.162 + 298.403 + 78.168 + 269.61 = $767.3 Mil.
Total Current Assets was $1,274.5 Mil.
Total Assets was $2,150.7 Mil.
Property, Plant and Equipment(Net PPE) was $375.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $20.1 Mil.
Selling, General & Admin. Expense(SGA) was $493.6 Mil.
Total Current Liabilities was $570.8 Mil.
Long-Term Debt was $700.2 Mil.
Net Income was -6.114 + 90.753 + -30.131 + 91.729 = $146.2 Mil.
Non Operating Income was -1.442 + 0.516 + 0.982 + -0.168 = $-0.1 Mil.
Cash Flow from Operations was -268.132 + 291.94 + -147.425 + 258.996 = $135.4 Mil.
|Accounts Receivable was $588.4 Mil.
Revenue was 101.745 + 291.123 + 68.461 + 303.949 = $765.3 Mil.
Gross Profit was 92.596 + 254.888 + 61.683 + 270.082 = $679.2 Mil.
Total Current Assets was $1,384.2 Mil.
Total Assets was $2,270.5 Mil.
Property, Plant and Equipment(Net PPE) was $370.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $18.2 Mil.
Selling, General & Admin. Expense(SGA) was $459.2 Mil.
Total Current Liabilities was $707.5 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)|
|=||(686.329 / 908.744)||/||(588.447 / 765.278)|
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)|
|=||(298.403 / 765.278)||/||(121.162 / 908.744)|
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 - (1274.481 + 375.779) / 2150.738)||/||(1 - (1384.236 + 370.538) / 2270.52)|
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))|
|=||(18.238 / (18.238 + 370.538))||/||(20.066 / (20.066 + 375.779))|
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)|
|=||(493.595 / 908.744)||/||(459.21 / 765.278)|
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)|
|=||((700.161 + 570.845) / 2150.738)||/||((515.16 + 707.549) / 2270.52)|
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|
|=||(146.237 - -0.112||-||135.379)||/||2150.738|
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 -2.29 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