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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 -3.37. And the median was -2.80.
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 * 0.9487||+||0.528 * 1.0039||+||0.404 * 1.3829||+||0.892 * 1.0295||+||0.115 * 0.9624|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9744||+||4.679 * -0.047||-||0.327 * 0.846|
|This Year (Apr16) TTM:||Last Year (Apr15) TTM:|
|Accounts Receivable was $37 Mil.|
Revenue was 287.973 + 250.456 + 225.467 + 251.269 = $1,015 Mil.
Gross Profit was 124 + 91.242 + 85.204 + 96.786 = $397 Mil.
Total Current Assets was $481 Mil.
Total Assets was $649 Mil.
Property, Plant and Equipment(Net PPE) was $135 Mil.
Depreciation, Depletion and Amortization(DDA) was $23 Mil.
Selling, General & Admin. Expense(SGA) was $278 Mil.
Total Current Liabilities was $163 Mil.
Long-Term Debt was $0 Mil.
Net Income was 35.874 + 11.846 + 8.319 + 15.594 = $72 Mil.
Non Operating Income was 0 + 1.894 + 0 + 0 = $2 Mil.
Cash Flow from Operations was 36.16 + 36.108 + 1.978 + 26.002 = $100 Mil.
|Accounts Receivable was $38 Mil.
Revenue was 283.899 + 240.113 + 216.01 + 246.058 = $986 Mil.
Gross Profit was 121.379 + 89.04 + 79.515 + 97.421 = $387 Mil.
Total Current Assets was $466 Mil.
Total Assets was $622 Mil.
Property, Plant and Equipment(Net PPE) was $133 Mil.
Depreciation, Depletion and Amortization(DDA) was $22 Mil.
Selling, General & Admin. Expense(SGA) was $277 Mil.
Total Current Liabilities was $185 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)|
|=||(37.421 / 1015.165)||/||(38.316 / 986.08)|
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)|
|=||(387.355 / 986.08)||/||(397.232 / 1015.165)|
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 - (481.127 + 135.289) / 648.804)||/||(1 - (466.293 + 133.48) / 622.234)|
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))|
|=||(21.948 / (21.948 + 133.48))||/||(23.265 / (23.265 + 135.289))|
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)|
|=||(278.2 / 1015.165)||/||(277.331 / 986.08)|
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 + 163.257) / 648.804)||/||((0 + 185.069) / 622.234)|
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|
|=||(71.633 - 1.894||-||100.248)||/||648.804|
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 -2.51 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