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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 Corporation has a M-score of -2.81 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Cato Corporation was -2.43. 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 Corporation 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 * 1.0058||+||0.528 * 1.0117||+||0.404 * 0.9832||+||0.892 * 0.9746||+||0.115 * 1.0701|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0326||+||4.679 * -0.068||-||0.327 * 0.9903|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jan14) TTM:||Last Year (Jan13) TTM:|
|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.
Net Income was 3.823 + 4.885 + 14.775 + 30.839 = $54.3 Mil.
Non Operating Income was 1.979 + 0 + 0 + 0 = $2.0 Mil.
Cash Flow from Operations was 15.962 + 1.246 + 26.662 + 49.089 = $93.0 Mil.
|Accounts Receivable was $40.0 Mil.
Revenue was 234.636 + 200.005 + 234.063 + 275.344 = $944.0 Mil.
Gross Profit was 83.365 + 69.606 + 91.604 + 117.512 = $362.1 Mil.
Total Current Assets was $390.2 Mil.
Total Assets was $532.6 Mil.
Property, Plant and Equipment(Net PPE) was $134.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $22.5 Mil.
Selling, General & Admin. Expense(SGA) was $244.3 Mil.
Total Current Liabilities was $159.6 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)|
|=||(39.224 / 920.033)||/||(40.016 / 944.048)|
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)|
|=||(72.256 / 944.048)||/||(76.966 / 920.033)|
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 - (446.748 + 141.129) / 596.918)||/||(1 - (390.214 + 134.227) / 532.646)|
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))|
|=||(22.455 / (22.455 + 134.227))||/||(21.825 / (21.825 + 141.129))|
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)|
|=||(245.868 / 920.033)||/||(244.326 / 944.048)|
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 + 177.131) / 596.918)||/||((0 + 159.602) / 532.646)|
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|
|=||(54.322 - 1.979||-||92.959)||/||596.918|
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 Corporation 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 Corporation Annual Data
Cato Corporation Quarterly Data