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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 Cato Corp was -2.21. The lowest was -3.42. And the median was -2.86.
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 Cato 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 * 0.9078||+||0.528 * 0.9898||+||0.404 * 2.2059||+||0.892 * 1.0377||+||0.115 * 0.9279|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9966||+||4.679 * -0.0358||-||0.327 * 0.9539|
|This Year (Oct15) TTM:||Last Year (Oct14) TTM:|
|Accounts Receivable was $38 Mil.|
Revenue was 225.467 + 251.269 + 283.899 + 240.113 = $1,001 Mil.
Gross Profit was 85.204 + 96.786 + 121.379 + 89.04 = $392 Mil.
Total Current Assets was $452 Mil.
Total Assets was $618 Mil.
Property, Plant and Equipment(Net PPE) was $140 Mil.
Depreciation, Depletion and Amortization(DDA) was $23 Mil.
Selling, General & Admin. Expense(SGA) was $279 Mil.
Total Current Liabilities was $174 Mil.
Long-Term Debt was $0 Mil.
Net Income was 8.319 + 15.594 + 31.083 + 9.152 = $64 Mil.
Non Operating Income was 0 + 0 + 0 + 2.179 = $2 Mil.
Cash Flow from Operations was 1.978 + 26.002 + 29.765 + 26.378 = $84 Mil.
|Accounts Receivable was $41 Mil.
Revenue was 216.01 + 246.058 + 284.732 + 217.574 = $964 Mil.
Gross Profit was 79.515 + 97.421 + 120.369 + 76.966 = $374 Mil.
Total Current Assets was $425 Mil.
Total Assets was $582 Mil.
Property, Plant and Equipment(Net PPE) was $146 Mil.
Depreciation, Depletion and Amortization(DDA) was $22 Mil.
Selling, General & Admin. Expense(SGA) was $270 Mil.
Total Current Liabilities was $172 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)|
|=||(38.205 / 1000.748)||/||(40.555 / 964.374)|
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)|
|=||(96.786 / 964.374)||/||(85.204 / 1000.748)|
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 - (452.361 + 139.512) / 618.377)||/||(1 - (425.209 + 145.962) / 582.489)|
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))|
|=||(21.778 / (21.778 + 145.962))||/||(22.697 / (22.697 + 139.512))|
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)|
|=||(279.146 / 1000.748)||/||(269.924 / 964.374)|
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 + 173.993) / 618.377)||/||((0 + 171.82) / 582.489)|
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|
|=||(64.148 - 2.179||-||84.123)||/||618.377|
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.
Cato Corp has a M-score of -2.21 signals that the company is likely to 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
Cato Corp Annual Data
Cato Corp Quarterly Data