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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 2.79. The lowest was -3.95. And the median was -2.76.
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 * 0.6108||+||0.528 * 1.0125||+||0.404 * 1.1562||+||0.892 * 1.5187||+||0.115 * 0.5095|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8862||+||4.679 * 0.0526||-||0.327 * 0.8252|
|This Year (Feb15) TTM:||Last Year (Feb14) TTM:|
|Accounts Receivable was $64 Mil.|
Revenue was 1730.9 + 1559 + 1595.8 + 1650.1 = $6,536 Mil.
Gross Profit was 388.6 + 289.3 + 313.2 + 334 = $1,325 Mil.
Total Current Assets was $982 Mil.
Total Assets was $6,003 Mil.
Property, Plant and Equipment(Net PPE) was $3,289 Mil.
Depreciation, Depletion and Amortization(DDA) was $317 Mil.
Selling, General & Admin. Expense(SGA) was $654 Mil.
Total Current Liabilities was $1,351 Mil.
Long-Term Debt was $1,512 Mil.
Net Income was 133.8 + -32.8 + 503.2 + 86.5 = $691 Mil.
Non Operating Income was -4.4 + -39.7 + -6.9 + -17.1 = $-68 Mil.
Cash Flow from Operations was 365.1 + -70.3 + 44.6 + 103.4 = $443 Mil.
|Accounts Receivable was $69 Mil.
Revenue was 1618.5 + 1485.6 + 1531.5 + -332 = $4,304 Mil.
Gross Profit was 352.7 + 285.1 + 323.4 + -77.8 = $883 Mil.
Total Current Assets was $909 Mil.
Total Assets was $7,225 Mil.
Property, Plant and Equipment(Net PPE) was $4,512 Mil.
Depreciation, Depletion and Amortization(DDA) was $212 Mil.
Selling, General & Admin. Expense(SGA) was $486 Mil.
Total Current Liabilities was $1,642 Mil.
Long-Term Debt was $2,534 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)|
|=||(64 / 6535.8)||/||(69 / 4303.6)|
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)|
|=||(289.3 / 4303.6)||/||(388.6 / 6535.8)|
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 - (981.9 + 3288.5) / 6002.9)||/||(1 - (909.2 + 4512.2) / 7224.8)|
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))|
|=||(211.5 / (211.5 + 4512.2))||/||(316.8 / (316.8 + 3288.5))|
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)|
|=||(653.8 / 6535.8)||/||(485.8 / 4303.6)|
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)|
|=||((1511.8 + 1350.8) / 6002.9)||/||((2533.6 + 1641.5) / 7224.8)|
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|
|=||(690.7 - -68.1||-||442.8)||/||6002.9|
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 -2.04 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