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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 Darden Restaurants Inc was -0.87. The lowest was -3.25. And the median was -2.82.
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 Darden Restaurants Inc 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 * 0.9093||+||0.528 * 0.9462||+||0.404 * 1.3068||+||0.892 * 1.0251||+||0.115 * 0.7258|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9023||+||4.679 * -0.0972||-||0.327 * 0.8035|
|This Year (May16) TTM:||Last Year (May15) TTM:|
|Accounts Receivable was $44 Mil.|
Revenue was 1790.2 + 1847.5 + 1608.8 + 1687 = $6,934 Mil.
Gross Profit was 407.9 + 432 + 324.9 + 376.3 = $1,541 Mil.
Total Current Assets was $820 Mil.
Total Assets was $4,583 Mil.
Property, Plant and Equipment(Net PPE) was $2,042 Mil.
Depreciation, Depletion and Amortization(DDA) was $290 Mil.
Selling, General & Admin. Expense(SGA) was $623 Mil.
Total Current Liabilities was $1,187 Mil.
Long-Term Debt was $440 Mil.
Net Income was 139.6 + 105.8 + 43.2 + 86.4 = $375 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 223.2 + 406.6 + 52.6 + 138 = $820 Mil.
|Accounts Receivable was $47 Mil.
Revenue was 1878.3 + 1730.9 + 1559 + 1595.8 = $6,764 Mil.
Gross Profit was 431.4 + 388.6 + 289.3 + 313.2 = $1,423 Mil.
Total Current Assets was $1,056 Mil.
Total Assets was $5,995 Mil.
Property, Plant and Equipment(Net PPE) was $3,216 Mil.
Depreciation, Depletion and Amortization(DDA) was $319 Mil.
Selling, General & Admin. Expense(SGA) was $674 Mil.
Total Current Liabilities was $1,197 Mil.
Long-Term Debt was $1,452 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)|
|=||(43.9 / 6933.5)||/||(47.1 / 6764)|
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)|
|=||(1422.5 / 6764)||/||(1541.1 / 6933.5)|
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 - (820.3 + 2041.6) / 4582.6)||/||(1 - (1056.4 + 3215.8) / 5994.7)|
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))|
|=||(319.3 / (319.3 + 3215.8))||/||(290.2 / (290.2 + 2041.6))|
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)|
|=||(622.9 / 6933.5)||/||(673.5 / 6764)|
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)|
|=||((440 + 1187.1) / 4582.6)||/||((1452.3 + 1196.7) / 5994.7)|
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|
|=||(375 - 0||-||820.4)||/||4582.6|
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.
Darden Restaurants Inc has a M-score of -2.85 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
Darden Restaurants Inc Annual Data
Darden Restaurants Inc Quarterly Data