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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 -1.97. The lowest was -3.47. And the median was -2.76.
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 * 0.8759||+||0.528 * 1.0529||+||0.404 * 1.1965||+||0.892 * 0.9461||+||0.115 * 0.9346|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.111||+||4.679 * -0.0411||-||0.327 * 1.015|
|This Year (Jan17) TTM:||Last Year (Jan16) TTM:|
|Accounts Receivable was $30.3 Mil.|
Revenue was 220.447 + 209.262 + 238.887 + 287.973 = $956.6 Mil.
Gross Profit was 65.12 + 75.635 + 89.828 + 124 = $354.6 Mil.
Total Current Assets was $443.8 Mil.
Total Assets was $606.3 Mil.
Property, Plant and Equipment(Net PPE) was $126.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $22.7 Mil.
Selling, General & Admin. Expense(SGA) was $289.8 Mil.
Total Current Liabilities was $171.9 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -12.809 + 8.26 + 15.887 + 35.874 = $47.2 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 25.875 + -8.753 + 18.847 + 36.16 = $72.1 Mil.
|Accounts Receivable was $36.6 Mil.
Revenue was 250.456 + 225.467 + 251.269 + 283.899 = $1,011.1 Mil.
Gross Profit was 91.242 + 85.204 + 96.786 + 121.379 = $394.6 Mil.
Total Current Assets was $472.1 Mil.
Total Assets was $642.3 Mil.
Property, Plant and Equipment(Net PPE) was $138.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $23.0 Mil.
Selling, General & Admin. Expense(SGA) was $275.7 Mil.
Total Current Liabilities was $179.4 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)|
|=||(30.336 / 956.569)||/||(36.61 / 1011.091)|
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)|
|=||(394.611 / 1011.091)||/||(354.583 / 956.569)|
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 - (443.808 + 126.386) / 606.324)||/||(1 - (472.052 + 138.303) / 642.344)|
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))|
|=||(22.963 / (22.963 + 138.303))||/||(22.716 / (22.716 + 126.386))|
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)|
|=||(289.795 / 956.569)||/||(275.713 / 1011.091)|
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 + 171.912) / 606.324)||/||((0 + 179.437) / 642.344)|
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|
|=||(47.212 - 0||-||72.129)||/||606.324|
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 -2.76 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