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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.
Cato Corp has a M-score of -2.87 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Cato Corp was -2.42. The lowest was -3.42. 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 * 1.028||+||0.528 * 0.9993||+||0.404 * 0.9904||+||0.892 * 0.9964||+||0.115 * 1.0501|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0516||+||4.679 * -0.0821||-||0.327 * 1.0628|
|This Year (Apr14) TTM:||Last Year (Apr13) TTM:|
|Accounts Receivable was $41.0 Mil.|
Revenue was 284.732 + 217.574 + 201.043 + 231.718 = $935.1 Mil.
Gross Profit was 120.369 + 76.966 + 72.256 + 86.768 = $356.4 Mil.
Total Current Assets was $429.4 Mil.
Total Assets was $583.2 Mil.
Property, Plant and Equipment(Net PPE) was $143.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $21.8 Mil.
Selling, General & Admin. Expense(SGA) was $254.0 Mil.
Total Current Liabilities was $179.6 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 30.006 + 3.823 + 4.885 + 14.775 = $53.5 Mil.
Non Operating Income was 0 + 1.979 + 0 + 0 = $2.0 Mil.
Cash Flow from Operations was 54.127 + 15.962 + 1.246 + 28.056 = $99.4 Mil.
|Accounts Receivable was $40.1 Mil.
Revenue was 269.698 + 234.636 + 200.005 + 234.063 = $938.4 Mil.
Gross Profit was 112.797 + 83.365 + 69.606 + 91.604 = $357.4 Mil.
Total Current Assets was $412.7 Mil.
Total Assets was $560.2 Mil.
Property, Plant and Equipment(Net PPE) was $137.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $22.1 Mil.
Selling, General & Admin. Expense(SGA) was $242.4 Mil.
Total Current Liabilities was $162.3 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)|
|=||(41.036 / 935.067)||/||(40.059 / 938.402)|
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)|
|=||(76.966 / 938.402)||/||(120.369 / 935.067)|
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 - (429.415 + 142.989) / 583.237)||/||(1 - (412.683 + 137.018) / 560.207)|
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))|
|=||(22.133 / (22.133 + 137.018))||/||(21.828 / (21.828 + 142.989))|
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)|
|=||(253.966 / 935.067)||/||(242.36 / 938.402)|
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 + 179.562) / 583.237)||/||((0 + 162.285) / 560.207)|
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|
|=||(53.489 - 1.979||-||99.391)||/||583.237|
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 -2.87 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