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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 -3.64. And the median was -2.59.
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 * 0.9235||+||0.528 * 1.0547||+||0.404 * 0.95||+||0.892 * 1.0289||+||0.115 * 1.1584|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9878||+||4.679 * -0.1184||-||0.327 * 1.074|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $175 Mil.|
Revenue was 310.24 + 316.733 + 309.577 + 291.194 = $1,228 Mil.
Gross Profit was 150.161 + 154.06 + 155.12 + 142.536 = $602 Mil.
Total Current Assets was $453 Mil.
Total Assets was $1,222 Mil.
Property, Plant and Equipment(Net PPE) was $137 Mil.
Depreciation, Depletion and Amortization(DDA) was $44 Mil.
Selling, General & Admin. Expense(SGA) was $449 Mil.
Total Current Liabilities was $318 Mil.
Long-Term Debt was $153 Mil.
Net Income was 13.584 + -110.409 + 24.088 + 16.424 = $-56 Mil.
Non Operating Income was 0.323 + 0.515 + 0.872 + 0.255 = $2 Mil.
Cash Flow from Operations was 18.604 + 17.58 + 34.063 + 16.184 = $86 Mil.
|Accounts Receivable was $184 Mil.
Revenue was 307.53 + 310.592 + 302.483 + 272.702 = $1,193 Mil.
Gross Profit was 157.847 + 157.871 + 159.401 + 141.891 = $617 Mil.
Total Current Assets was $550 Mil.
Total Assets was $1,484 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 $329 Mil.
Long-Term Debt was $204 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)|
|=||(174.926 / 1227.744)||/||(184.099 / 1193.307)|
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)|
|=||(154.06 / 1193.307)||/||(150.161 / 1227.744)|
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 - (452.683 + 136.583) / 1222.438)||/||(1 - (550.199 + 124.894) / 1484.36)|
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))|
|=||(48.928 / (48.928 + 124.894))||/||(43.843 / (43.843 + 136.583))|
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)|
|=||(448.71 / 1227.744)||/||(441.529 / 1193.307)|
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)|
|=||((153.476 + 318.496) / 1222.438)||/||((204.413 + 329.189) / 1484.36)|
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|
|=||(-56.313 - 1.965||-||86.431)||/||1222.438|
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 -3.07 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