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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 4.21. The lowest was -78.44. And the median was -2.87.
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 * 0.9437||+||0.528 * 0.0887||+||0.404 * 1.0606||+||0.892 * 1.0452||+||0.115 * 0.9863|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9469||+||4.679 * -0.0956||-||0.327 * 1.2089|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $11 Mil.|
Revenue was 499.114 + 496.406 + 481.431 + 475.075 = $1,952 Mil.
Gross Profit was 88.712 + 95.385 + 86.986 + 95.213 = $366 Mil.
Total Current Assets was $174 Mil.
Total Assets was $1,106 Mil.
Property, Plant and Equipment(Net PPE) was $824 Mil.
Depreciation, Depletion and Amortization(DDA) was $82 Mil.
Selling, General & Admin. Expense(SGA) was $115 Mil.
Total Current Liabilities was $263 Mil.
Long-Term Debt was $25 Mil.
Net Income was 24.223 + 30.049 + 22.518 + 33 = $110 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 38.87 + 44.992 + 77.116 + 54.468 = $215 Mil.
|Accounts Receivable was $11 Mil.
Revenue was 469.699 + 470.118 + 463.018 + 464.695 = $1,868 Mil.
Gross Profit was 92.404 + 92.204 + 86.764 + -240.276 = $31 Mil.
Total Current Assets was $216 Mil.
Total Assets was $1,101 Mil.
Property, Plant and Equipment(Net PPE) was $784 Mil.
Depreciation, Depletion and Amortization(DDA) was $77 Mil.
Selling, General & Admin. Expense(SGA) was $116 Mil.
Total Current Liabilities was $237 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)|
|=||(11.013 / 1952.026)||/||(11.165 / 1867.53)|
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)|
|=||(95.385 / 1867.53)||/||(88.712 / 1952.026)|
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 - (173.852 + 824.41) / 1105.514)||/||(1 - (216.091 + 784.319) / 1101.138)|
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))|
|=||(76.999 / (76.999 + 784.319))||/||(82.167 / (82.167 + 824.41))|
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)|
|=||(115.187 / 1952.026)||/||(116.378 / 1867.53)|
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)|
|=||((25 + 262.64) / 1105.514)||/||((0 + 236.985) / 1101.138)|
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|
|=||(109.79 - 0||-||215.446)||/||1105.514|
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 -3.46 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