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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 -2.15. The lowest was -3.70. 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 * 0.94||+||0.528 * 1.0164||+||0.404 * 0.9972||+||0.892 * 1.0194||+||0.115 * 0.9629|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9933||+||4.679 * -0.0624||-||0.327 * 0.933|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $528 Mil.|
Revenue was 1401 + 1345 + 1352 + 1574 = $5,672 Mil.
Gross Profit was 605 + 572 + 578 + 646 = $2,401 Mil.
Total Current Assets was $1,495 Mil.
Total Assets was $4,228 Mil.
Property, Plant and Equipment(Net PPE) was $917 Mil.
Depreciation, Depletion and Amortization(DDA) was $175 Mil.
Selling, General & Admin. Expense(SGA) was $1,288 Mil.
Total Current Liabilities was $1,300 Mil.
Long-Term Debt was $1,796 Mil.
Net Income was 174 + 125 + 90 + 170 = $559 Mil.
Non Operating Income was 1 + 2 + -3 + -9 = $-9 Mil.
Cash Flow from Operations was 218 + 34 + 243 + 337 = $832 Mil.
|Accounts Receivable was $551 Mil.
Revenue was 1366 + 1308 + 1343 + 1547 = $5,564 Mil.
Gross Profit was 575 + 555 + 584 + 680 = $2,394 Mil.
Total Current Assets was $1,520 Mil.
Total Assets was $4,374 Mil.
Property, Plant and Equipment(Net PPE) was $970 Mil.
Depreciation, Depletion and Amortization(DDA) was $177 Mil.
Selling, General & Admin. Expense(SGA) was $1,272 Mil.
Total Current Liabilities was $1,838 Mil.
Long-Term Debt was $1,595 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)|
|=||(528 / 5672)||/||(551 / 5564)|
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)|
|=||(572 / 5564)||/||(605 / 5672)|
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 - (1495 + 917) / 4228)||/||(1 - (1520 + 970) / 4374)|
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))|
|=||(177 / (177 + 970))||/||(175 / (175 + 917))|
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)|
|=||(1288 / 5672)||/||(1272 / 5564)|
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)|
|=||((1796 + 1300) / 4228)||/||((1595 + 1838) / 4374)|
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|
|=||(559 - -9||-||832)||/||4228|
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 -2.78 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