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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.
During the past 13 years, the highest Beneish M-Score of Brady Corp was -1.85. The lowest was -3.65. And the median was -2.61.
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 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 * 1.0061||+||0.528 * 1.0024||+||0.404 * 0.9513||+||0.892 * 0.9394||+||0.115 * 0.9123|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0113||+||4.679 * -0.1154||-||0.327 * 1.0223|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Apr16) TTM:||Last Year (Apr15) TTM:|
|Accounts Receivable was $153 Mil.|
Revenue was 286.816 + 268.63 + 283.073 + 288.636 = $1,127 Mil.
Gross Profit was 145.443 + 132.892 + 139.349 + 129.069 = $547 Mil.
Total Current Assets was $429 Mil.
Total Assets was $1,061 Mil.
Property, Plant and Equipment(Net PPE) was $100 Mil.
Depreciation, Depletion and Amortization(DDA) was $36 Mil.
Selling, General & Admin. Expense(SGA) was $410 Mil.
Total Current Liabilities was $164 Mil.
Long-Term Debt was $236 Mil.
Net Income was 20.981 + 15.29 + 18.703 + -39.394 = $16 Mil.
Non Operating Income was 0.721 + -0.992 + -0.759 + -0.123 = $-1 Mil.
Cash Flow from Operations was 40.296 + 27.884 + 30.37 + 40.608 = $139 Mil.
|Accounts Receivable was $162 Mil.
Revenue was 290.227 + 282.628 + 310.24 + 316.733 = $1,200 Mil.
Gross Profit was 140.999 + 138.203 + 150.161 + 154.06 = $583 Mil.
Total Current Assets was $416 Mil.
Total Assets was $1,142 Mil.
Property, Plant and Equipment(Net PPE) was $124 Mil.
Depreciation, Depletion and Amortization(DDA) was $39 Mil.
Selling, General & Admin. Expense(SGA) was $431 Mil.
Total Current Liabilities was $207 Mil.
Long-Term Debt was $214 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)|
|=||(153.289 / 1127.155)||/||(162.18 / 1199.828)|
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)|
|=||(132.892 / 1199.828)||/||(145.443 / 1127.155)|
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 - (429.433 + 99.769) / 1061.275)||/||(1 - (416.335 + 123.778) / 1141.985)|
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))|
|=||(39.327 / (39.327 + 123.778))||/||(35.843 / (35.843 + 99.769))|
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)|
|=||(409.586 / 1127.155)||/||(431.135 / 1199.828)|
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)|
|=||((236.31 + 163.782) / 1061.275)||/||((213.839 + 207.276) / 1141.985)|
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|
|=||(15.58 - -1.153||-||139.158)||/||1061.275|
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 Corp has a M-score of -3.11 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 Corp Annual Data
Brady Corp Quarterly Data