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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 Clorox Co was -2.18. The lowest was -3.40. And the median was -2.69.
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 Clorox Co 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 * 1.0762||+||0.528 * 0.9666||+||0.404 * 1.0789||+||0.892 * 1.0187||+||0.115 * 1.0092|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0351||+||4.679 * -0.0292||-||0.327 * 0.966|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $569 Mil.|
Revenue was 1600 + 1426 + 1345 + 1390 = $5,761 Mil.
Gross Profit was 727 + 646 + 600 + 625 = $2,598 Mil.
Total Current Assets was $1,485 Mil.
Total Assets was $4,518 Mil.
Property, Plant and Equipment(Net PPE) was $906 Mil.
Depreciation, Depletion and Amortization(DDA) was $165 Mil.
Selling, General & Admin. Expense(SGA) was $1,393 Mil.
Total Current Liabilities was $1,558 Mil.
Long-Term Debt was $1,797 Mil.
Net Income was 165 + 162 + 149 + 172 = $648 Mil.
Non Operating Income was 0 + -2 + 3 + 1 = $2 Mil.
Cash Flow from Operations was 331 + 262 + 38 + 147 = $778 Mil.
|Accounts Receivable was $519 Mil.
Revenue was 1557 + 1401 + 1345 + 1352 = $5,655 Mil.
Gross Profit was 710 + 605 + 572 + 578 = $2,465 Mil.
Total Current Assets was $1,429 Mil.
Total Assets was $4,164 Mil.
Property, Plant and Equipment(Net PPE) was $918 Mil.
Depreciation, Depletion and Amortization(DDA) was $169 Mil.
Selling, General & Admin. Expense(SGA) was $1,321 Mil.
Total Current Liabilities was $1,405 Mil.
Long-Term Debt was $1,796 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)|
|=||(569 / 5761)||/||(519 / 5655)|
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)|
|=||(2465 / 5655)||/||(2598 / 5761)|
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 - (1485 + 906) / 4518)||/||(1 - (1429 + 918) / 4164)|
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))|
|=||(169 / (169 + 918))||/||(165 / (165 + 906))|
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)|
|=||(1393 / 5761)||/||(1321 / 5655)|
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)|
|=||((1797 + 1558) / 4518)||/||((1796 + 1405) / 4164)|
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|
|=||(648 - 2||-||778)||/||4518|
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.
Clorox Co 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
Clorox Co Annual Data
Clorox Co Quarterly Data