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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 -2.79.
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 * 1.1053||+||0.528 * 0.9798||+||0.404 * 1.1792||+||0.892 * 1.0761||+||0.115 * 0.9145|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9403||+||4.679 * 0.0398||-||0.327 * 0.7667|
|This Year (May15) TTM:||Last Year (May14) TTM:|
|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.
Net Income was 105.3 + 133.8 + -32.8 + 503.2 = $710 Mil.
Non Operating Income was 51 + -4.4 + -39.7 + -6.9 = $-0 Mil.
Cash Flow from Operations was 131.6 + 365.1 + -70.3 + 44.6 = $471 Mil.
|Accounts Receivable was $40 Mil.
Revenue was 1650.1 + 1618.5 + 1485.6 + 1531.5 = $6,286 Mil.
Gross Profit was 334 + 352.7 + 285.1 + 323.4 = $1,295 Mil.
Total Current Assets was $1,976 Mil.
Total Assets was $7,083 Mil.
Property, Plant and Equipment(Net PPE) was $3,381 Mil.
Depreciation, Depletion and Amortization(DDA) was $304 Mil.
Selling, General & Admin. Expense(SGA) was $666 Mil.
Total Current Liabilities was $1,619 Mil.
Long-Term Debt was $2,463 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)|
|=||(47.1 / 6764)||/||(39.6 / 6285.7)|
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)|
|=||(388.6 / 6285.7)||/||(431.4 / 6764)|
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 - (1056.4 + 3215.8) / 5994.7)||/||(1 - (1975.8 + 3381) / 7082.7)|
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))|
|=||(304.4 / (304.4 + 3381))||/||(319.3 / (319.3 + 3215.8))|
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)|
|=||(673.5 / 6764)||/||(665.6 / 6285.7)|
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)|
|=||((1452.3 + 1196.7) / 5994.7)||/||((2463.4 + 1618.5) / 7082.7)|
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|
|=||(709.5 - -1.7763568394E-15||-||471)||/||5994.7|
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 -1.99 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
Darden Restaurants Inc Annual Data
Darden Restaurants Inc Quarterly Data