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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 Dean Foods Co was 0.86. The lowest was -4.48. And the median was -2.60.
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 Dean Foods 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 * 0.8315||+||0.528 * 1.0397||+||0.404 * 0.8563||+||0.892 * 1.0163||+||0.115 * 0.996|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9977||+||4.679 * -0.1271||-||0.327 * 0.9999|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $655 Mil.|
Revenue was 2050.762 + 2395.007 + 2373.28 + 2393.869 = $9,213 Mil.
Gross Profit was 478.309 + 441.4 + 416.8 + 399.088 = $1,736 Mil.
Total Current Assets was $1,041 Mil.
Total Assets was $2,514 Mil.
Property, Plant and Equipment(Net PPE) was $1,159 Mil.
Depreciation, Depletion and Amortization(DDA) was $163 Mil.
Selling, General & Admin. Expense(SGA) was $1,658 Mil.
Total Current Liabilities was $714 Mil.
Long-Term Debt was $852 Mil.
Net Income was -73.74 + 5.277 + -15.972 + -0.645 = $-85 Mil.
Non Operating Income was -43.163 + -0.577 + 0.487 + -0.048 = $-43 Mil.
Cash Flow from Operations was 157.579 + 104.875 + 22.803 + -7.531 = $278 Mil.
|Accounts Receivable was $775 Mil.
Revenue was 2341.04 + 2295.45 + 2200.899 + 2227.542 = $9,065 Mil.
Gross Profit was 416.175 + 445.77 + 441.285 + 472.3 = $1,776 Mil.
Total Current Assets was $1,243 Mil.
Total Assets was $2,863 Mil.
Property, Plant and Equipment(Net PPE) was $1,203 Mil.
Depreciation, Depletion and Amortization(DDA) was $169 Mil.
Selling, General & Admin. Expense(SGA) was $1,635 Mil.
Total Current Liabilities was $822 Mil.
Long-Term Debt was $963 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)|
|=||(655.135 / 9212.918)||/||(775.268 / 9064.931)|
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)|
|=||(441.4 / 9064.931)||/||(478.309 / 9212.918)|
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 - (1040.789 + 1158.55) / 2513.507)||/||(1 - (1242.705 + 1202.754) / 2863.442)|
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))|
|=||(168.771 / (168.771 + 1202.754))||/||(163.309 / (163.309 + 1158.55))|
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)|
|=||(1657.779 / 9212.918)||/||(1634.915 / 9064.931)|
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)|
|=||((852.238 + 713.865) / 2513.507)||/||((962.657 + 821.694) / 2863.442)|
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|
|=||(-85.08 - -43.301||-||277.726)||/||2513.507|
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.
Dean Foods Co has a M-score of -3.25 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
Dean Foods Co Annual Data
Dean Foods Co Quarterly Data