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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 -2.53. The lowest was -3.28. 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 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 * 0.9746||+||0.528 * 0.9688||+||0.404 * 2.0239||+||0.892 * 1.0731||+||0.115 * 0.9559|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0469||+||4.679 * -0.0972||-||0.327 * 1.0742|
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $41.0 Mil.|
Revenue was 240.113 + 216.01 + 246.46 + 284.732 = $987.3 Mil.
Gross Profit was 89.04 + 79.515 + 97.421 + 120.369 = $386.3 Mil.
Total Current Assets was $454.5 Mil.
Total Assets was $608.3 Mil.
Property, Plant and Equipment(Net PPE) was $135.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $22.0 Mil.
Selling, General & Admin. Expense(SGA) was $276.2 Mil.
Total Current Liabilities was $193.9 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 9.152 + 5.692 + 15.651 + 30.006 = $60.5 Mil.
Non Operating Income was 2.179 + 0 + 0 + 0 = $2.2 Mil.
Cash Flow from Operations was 27.579 + 6.342 + 29.411 + 54.127 = $117.5 Mil.
|Accounts Receivable was $39.2 Mil.
Revenue was 217.574 + 201.043 + 231.718 + 269.698 = $920.0 Mil.
Gross Profit was 76.966 + 72.256 + 86.768 + 112.797 = $348.8 Mil.
Total Current Assets was $446.7 Mil.
Total Assets was $596.9 Mil.
Property, Plant and Equipment(Net PPE) was $141.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $21.8 Mil.
Selling, General & Admin. Expense(SGA) was $245.9 Mil.
Total Current Liabilities was $177.1 Mil.
Long-Term Debt was $0.0 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)|
|=||(41.023 / 987.315)||/||(39.224 / 920.033)|
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)|
|=||(79.515 / 920.033)||/||(89.04 / 987.315)|
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 - (454.451 + 135.181) / 608.278)||/||(1 - (446.748 + 141.129) / 596.918)|
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))|
|=||(21.825 / (21.825 + 141.129))||/||(22.026 / (22.026 + 135.181))|
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)|
|=||(276.234 / 987.315)||/||(245.868 / 920.033)|
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 + 193.901) / 608.278)||/||((0 + 177.131) / 596.918)|
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|
|=||(60.501 - 2.179||-||117.459)||/||608.278|
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 -2.53 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
Cato Corp Annual Data
Cato Corp Quarterly Data