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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 -0.32. The lowest was -3.31. And the median was -2.80.
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 * 1.0191||+||0.528 * 0.9926||+||0.404 * 1.3326||+||0.892 * 1.0834||+||0.115 * 0.9925|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9811||+||4.679 * -0.1261||-||0.327 * 1.0252|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $16 Mil.|
Revenue was 603.146 + 560.018 + 558.862 + 553.693 = $2,276 Mil.
Gross Profit was 116.549 + 109.736 + 114.738 + 107.705 = $449 Mil.
Total Current Assets was $221 Mil.
Total Assets was $1,293 Mil.
Property, Plant and Equipment(Net PPE) was $910 Mil.
Depreciation, Depletion and Amortization(DDA) was $88 Mil.
Selling, General & Admin. Expense(SGA) was $146 Mil.
Total Current Liabilities was $377 Mil.
Long-Term Debt was $0 Mil.
Net Income was 32.381 + 34.574 + 38.585 + 33.954 = $139 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 85.99 + 64.744 + 75.478 + 76.308 = $303 Mil.
|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.
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)|
|=||(15.632 / 2275.719)||/||(14.159 / 2100.609)|
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)|
|=||(411.12 / 2100.609)||/||(448.728 / 2275.719)|
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 - (221.427 + 910.134) / 1293.319)||/||(1 - (225.396 + 892.191) / 1233.346)|
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))|
|=||(85.563 / (85.563 + 892.191))||/||(88.01 / (88.01 + 910.134))|
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)|
|=||(146.042 / 2275.719)||/||(137.402 / 2100.609)|
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 + 376.526) / 1293.319)||/||((0 + 350.226) / 1233.346)|
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|
|=||(139.494 - 0||-||302.52)||/||1293.319|
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 -2.85 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