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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.
Brady Corporation has a M-score of -3.71 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Brady Corporation was -1.86. The lowest was -3.65. And the median was -2.58.
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 Brady Corporation 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 * 0.7734||+||0.528 * 0.9617||+||0.404 * 0.9024||+||0.892 * 0.9479||+||0.115 * 0.7978|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0726||+||4.679 * -0.1921||-||0.327 * 0.9474|
|This Year (Jan14) TTM:||Last Year (Jan13) TTM:|
|Accounts Receivable was $168 Mil.|
Revenue was 291.194 + 305.974 + 295.701 + 305.737 = $1,199 Mil.
Gross Profit was 142.536 + 156.945 + 153.56 + 159.706 = $613 Mil.
Total Current Assets was $520 Mil.
Total Assets was $1,438 Mil.
Property, Plant and Equipment(Net PPE) was $125 Mil.
Depreciation, Depletion and Amortization(DDA) was $49 Mil.
Selling, General & Admin. Expense(SGA) was $442 Mil.
Total Current Liabilities was $290 Mil.
Long-Term Debt was $203 Mil.
Net Income was 16.424 + 23.928 + -177.271 + 4.233 = $-133 Mil.
Non Operating Income was 0.255 + 0 + 1.095 + 1.131 = $2 Mil.
Cash Flow from Operations was 16.184 + 25.593 + 53.873 + 45.436 = $141 Mil.
|Accounts Receivable was $229 Mil.
Revenue was 272.702 + 337.646 + 322.548 + 331.629 = $1,265 Mil.
Gross Profit was 141.891 + 164.62 + 155.123 + 160.047 = $622 Mil.
Total Current Assets was $543 Mil.
Total Assets was $1,786 Mil.
Property, Plant and Equipment(Net PPE) was $151 Mil.
Depreciation, Depletion and Amortization(DDA) was $44 Mil.
Selling, General & Admin. Expense(SGA) was $435 Mil.
Total Current Liabilities was $381 Mil.
Long-Term Debt was $264 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)|
|=||(168.037 / 1198.606)||/||(229.219 / 1264.525)|
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)|
|=||(156.945 / 1264.525)||/||(142.536 / 1198.606)|
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 - (519.897 + 124.516) / 1438.04)||/||(1 - (543.017 + 150.742) / 1785.969)|
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))|
|=||(43.857 / (43.857 + 150.742))||/||(49.021 / (49.021 + 124.516))|
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)|
|=||(442.013 / 1198.606)||/||(434.744 / 1264.525)|
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)|
|=||((203.063 + 289.651) / 1438.04)||/||((264.417 + 381.477) / 1785.969)|
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|
|=||(-132.686 - 2.481||-||141.086)||/||1438.04|
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.
Brady Corporation has a M-score of -3.71 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
Brady Corporation Annual Data
Brady Corporation Quarterly Data