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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 Cheesecake Factory Inc was -1.52. The lowest was -3.48. And the median was -2.66.
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 Cheesecake Factory Inc 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 * 0.8783||+||0.528 * 0.935||+||0.404 * 1.0029||+||0.892 * 1.0627||+||0.115 * 1.0389|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0856||+||4.679 * -0.0964||-||0.327 * 1.0242|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $14 Mil.|
Revenue was 526.841 + 526.688 + 529.107 + 517.973 = $2,101 Mil.
Gross Profit was 103.494 + 100.555 + 110.314 + 96.757 = $411 Mil.
Total Current Assets was $225 Mil.
Total Assets was $1,233 Mil.
Property, Plant and Equipment(Net PPE) was $892 Mil.
Depreciation, Depletion and Amortization(DDA) was $86 Mil.
Selling, General & Admin. Expense(SGA) was $137 Mil.
Total Current Liabilities was $350 Mil.
Long-Term Debt was $0 Mil.
Net Income was 27.2 + 26.176 + 34.724 + 28.423 = $117 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 74.337 + 40.12 + 55.618 + 65.348 = $235 Mil.
|Accounts Receivable was $15 Mil.
Revenue was 499.673 + 499.114 + 496.406 + 481.431 = $1,977 Mil.
Gross Profit was 90.629 + 88.712 + 95.385 + 86.986 = $362 Mil.
Total Current Assets was $224 Mil.
Total Assets was $1,161 Mil.
Property, Plant and Equipment(Net PPE) was $828 Mil.
Depreciation, Depletion and Amortization(DDA) was $83 Mil.
Selling, General & Admin. Expense(SGA) was $119 Mil.
Total Current Liabilities was $322 Mil.
Long-Term Debt was $0 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)|
|=||(14.159 / 2100.609)||/||(15.17 / 1976.624)|
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)|
|=||(100.555 / 1976.624)||/||(103.494 / 2100.609)|
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 - (225.396 + 892.191) / 1233.346)||/||(1 - (224.386 + 828.305) / 1161.376)|
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))|
|=||(82.835 / (82.835 + 828.305))||/||(85.563 / (85.563 + 892.191))|
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)|
|=||(137.402 / 2100.609)||/||(119.094 / 1976.624)|
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)|
|=||((0 + 350.226) / 1233.346)||/||((0 + 322.011) / 1161.376)|
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|
|=||(116.523 - 0||-||235.423)||/||1233.346|
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.
Cheesecake Factory Inc has a M-score of -3.04 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
Cheesecake Factory Inc Annual Data
Cheesecake Factory Inc Quarterly Data