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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 6 years, the highest Beneish M-Score of Fortune Brands Home & Security Inc was -2.38. The lowest was -2.80. And the median was -2.54.
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 Fortune Brands Home & Security 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 * 0.9162||+||0.528 * 1.0169||+||0.404 * 0.9596||+||0.892 * 1.0785||+||0.115 * 0.9537|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9453||+||4.679 * -0.0448||-||0.327 * 1.2956|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $477 Mil.|
Revenue was 950.8 + 940.3 + 1097.7 + 1142.2 = $4,131 Mil.
Gross Profit was 316.9 + 317.1 + 378.3 + 400.4 = $1,413 Mil.
Total Current Assets was $1,337 Mil.
Total Assets was $4,085 Mil.
Property, Plant and Equipment(Net PPE) was $544 Mil.
Depreciation, Depletion and Amortization(DDA) was $99 Mil.
Selling, General & Admin. Expense(SGA) was $983 Mil.
Total Current Liabilities was $609 Mil.
Long-Term Debt was $734 Mil.
Net Income was 40 + 45.1 + -21.1 + 93.3 = $157 Mil.
Non Operating Income was -1.7 + -1.1 + 0.3 + -0.8 = $-3 Mil.
Cash Flow from Operations was -66.7 + 143.5 + 140.9 + 125.9 = $344 Mil.
|Accounts Receivable was $483 Mil.
Revenue was 889.1 + 855.7 + 1045 + 1040.4 = $3,830 Mil.
Gross Profit was 295.3 + 300.8 + 358.9 + 377 = $1,332 Mil.
Total Current Assets was $1,265 Mil.
Total Assets was $4,107 Mil.
Property, Plant and Equipment(Net PPE) was $532 Mil.
Depreciation, Depletion and Amortization(DDA) was $92 Mil.
Selling, General & Admin. Expense(SGA) was $964 Mil.
Total Current Liabilities was $567 Mil.
Long-Term Debt was $475 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)|
|=||(477.2 / 4131)||/||(482.9 / 3830.2)|
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)|
|=||(317.1 / 3830.2)||/||(316.9 / 4131)|
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 - (1336.5 + 543.7) / 4085.3)||/||(1 - (1264.7 + 532.1) / 4106.8)|
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))|
|=||(91.9 / (91.9 + 532.1))||/||(99.3 / (99.3 + 543.7))|
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)|
|=||(982.6 / 4131)||/||(963.8 / 3830.2)|
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)|
|=||((733.7 + 609.1) / 4085.3)||/||((475 + 566.9) / 4106.8)|
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|
|=||(157.3 - -3.3||-||343.6)||/||4085.3|
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.
Fortune Brands Home & Security Inc has a M-score of -2.80 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
Fortune Brands Home & Security Inc Annual Data
Fortune Brands Home & Security Inc Quarterly Data