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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 -2.42. 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 * 0.9571||+||0.528 * 0.977||+||0.404 * 1.4004||+||0.892 * 1.0295||+||0.115 * 1.0246|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0706||+||4.679 * -0.0904||-||0.327 * 1.1089|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $40.6 Mil.|
Revenue was 216.01 + 246.46 + 284.732 + 217.574 = $964.8 Mil.
Gross Profit was 79.515 + 97.421 + 120.369 + 76.966 = $374.3 Mil.
Total Current Assets was $425.2 Mil.
Total Assets was $582.5 Mil.
Property, Plant and Equipment(Net PPE) was $146.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $21.8 Mil.
Selling, General & Admin. Expense(SGA) was $269.9 Mil.
Total Current Liabilities was $171.8 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 5.692 + 15.651 + 30.006 + 3.823 = $55.2 Mil.
Non Operating Income was 0 + 0 + 0 + 1.979 = $2.0 Mil.
Cash Flow from Operations was 6.342 + 29.411 + 54.127 + 15.962 = $105.8 Mil.
|Accounts Receivable was $41.2 Mil.
Revenue was 201.043 + 231.718 + 269.698 + 234.636 = $937.1 Mil.
Gross Profit was 72.256 + 86.768 + 112.797 + 83.365 = $355.2 Mil.
Total Current Assets was $421.2 Mil.
Total Assets was $572.1 Mil.
Property, Plant and Equipment(Net PPE) was $143.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $21.9 Mil.
Selling, General & Admin. Expense(SGA) was $244.9 Mil.
Total Current Liabilities was $152.2 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)|
|=||(40.555 / 964.776)||/||(41.156 / 937.095)|
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)|
|=||(97.421 / 937.095)||/||(79.515 / 964.776)|
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 - (425.209 + 145.962) / 582.489)||/||(1 - (421.198 + 142.991) / 572.127)|
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))|
|=||(21.94 / (21.94 + 142.991))||/||(21.778 / (21.778 + 145.962))|
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)|
|=||(269.924 / 964.776)||/||(244.885 / 937.095)|
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 + 171.82) / 582.489)||/||((0 + 152.193) / 572.127)|
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|
|=||(55.172 - 1.979||-||105.842)||/||582.489|
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 -2.81 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