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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 -1.86. The lowest was -3.65. And the median was -2.60.
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 * 1.0726||+||0.528 * 1.0218||+||0.404 * 0.9605||+||0.892 * 0.9273||+||0.115 * 0.925|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.986||+||4.679 * -0.1109||-||0.327 * 1.0506|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $151 Mil.|
Revenue was 268.63 + 283.073 + 288.636 + 290.227 = $1,131 Mil.
Gross Profit was 132.892 + 139.349 + 129.069 + 140.999 = $542 Mil.
Total Current Assets was $406 Mil.
Total Assets was $1,031 Mil.
Property, Plant and Equipment(Net PPE) was $101 Mil.
Depreciation, Depletion and Amortization(DDA) was $37 Mil.
Selling, General & Admin. Expense(SGA) was $407 Mil.
Total Current Liabilities was $157 Mil.
Long-Term Debt was $248 Mil.
Net Income was 15.29 + 18.703 + -39.394 + 17.213 = $12 Mil.
Non Operating Income was -0.992 + -0.759 + -0.123 + 0.434 = $-1 Mil.
Cash Flow from Operations was 27.884 + 30.37 + 40.608 + 28.81 = $128 Mil.
|Accounts Receivable was $151 Mil.
Revenue was 282.628 + 310.24 + 316.733 + 309.577 = $1,219 Mil.
Gross Profit was 138.203 + 150.161 + 154.06 + 155.12 = $598 Mil.
Total Current Assets was $406 Mil.
Total Assets was $1,135 Mil.
Property, Plant and Equipment(Net PPE) was $129 Mil.
Depreciation, Depletion and Amortization(DDA) was $42 Mil.
Selling, General & Admin. Expense(SGA) was $445 Mil.
Total Current Liabilities was $201 Mil.
Long-Term Debt was $223 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)|
|=||(150.615 / 1130.566)||/||(151.426 / 1219.178)|
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)|
|=||(139.349 / 1219.178)||/||(132.892 / 1130.566)|
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 - (405.909 + 101.456) / 1031.285)||/||(1 - (405.616 + 129.254) / 1135.455)|
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))|
|=||(42.322 / (42.322 + 129.254))||/||(36.894 / (36.894 + 101.456))|
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)|
|=||(406.744 / 1130.566)||/||(444.849 / 1219.178)|
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)|
|=||((247.689 + 157.132) / 1031.285)||/||((222.778 + 201.465) / 1135.455)|
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|
|=||(11.812 - -1.44||-||127.672)||/||1031.285|
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 -3.02 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