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Beneish M-Score -1.2 higher than -2.22, which implies that it might have manipulated its financial results.
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 Cintas Corp was -1.20. The lowest was -3.12. And the median was -2.61.
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 Cintas 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 * 1.9433||+||0.528 * 0.9825||+||0.404 * 1.0206||+||0.892 * 1.0934||+||0.115 * 1.0511|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.013||+||4.679 * 0.0603||-||0.327 * 0.8644|
|This Year (Aug16) TTM:||Last Year (Aug15) TTM:|
|Accounts Receivable was $1,128 Mil.|
Revenue was 1294.13 + 1271.405 + 1216.083 + 1219.08 = $5,001 Mil.
Gross Profit was 583.774 + 553.718 + 524.608 + 527.4 = $2,190 Mil.
Total Current Assets was $1,595 Mil.
Total Assets was $4,167 Mil.
Property, Plant and Equipment(Net PPE) was $1,033 Mil.
Depreciation, Depletion and Amortization(DDA) was $169 Mil.
Selling, General & Admin. Expense(SGA) was $1,384 Mil.
Total Current Liabilities was $711 Mil.
Long-Term Debt was $1,045 Mil.
Net Income was 138.091 + 130.898 + 117.341 + 345.1 = $731 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 157.588 + 168.691 + 32.117 + 121.954 = $480 Mil.
|Accounts Receivable was $531 Mil.
Revenue was 1198.89 + 1142.583 + 1108.847 + 1123.379 = $4,574 Mil.
Gross Profit was 524.144 + 486.66 + 475.307 + 481.424 = $1,968 Mil.
Total Current Assets was $1,734 Mil.
Total Assets was $4,123 Mil.
Property, Plant and Equipment(Net PPE) was $897 Mil.
Depreciation, Depletion and Amortization(DDA) was $155 Mil.
Selling, General & Admin. Expense(SGA) was $1,249 Mil.
Total Current Liabilities was $959 Mil.
Long-Term Debt was $1,050 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)|
|=||(1128.496 / 5000.698)||/||(531.127 / 4573.699)|
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)|
|=||(1967.535 / 4573.699)||/||(2189.5 / 5000.698)|
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 - (1594.748 + 1033.16) / 4167.145)||/||(1 - (1733.952 + 896.786) / 4122.949)|
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))|
|=||(155.196 / (155.196 + 896.786))||/||(168.679 / (168.679 + 1033.16))|
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)|
|=||(1383.511 / 5000.698)||/||(1249.109 / 4573.699)|
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)|
|=||((1044.628 + 710.859) / 4167.145)||/||((1050 + 959.326) / 4122.949)|
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|
|=||(731.43 - 0||-||480.35)||/||4167.145|
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.
Cintas Corp has a M-score of -1.20 signals that the company is likely to 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
Cintas Corp Annual Data
Cintas Corp Quarterly Data