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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 7 years, the highest Beneish M-Score of Fortune Brands Home & Security Inc was -2.35. The lowest was -2.79. 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 * 0.8592||+||0.528 * 0.9726||+||0.404 * 0.9938||+||0.892 * 1.1554||+||0.115 * 0.9137|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9362||+||4.679 * -0.0283||-||0.327 * 1.09|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $569 Mil.|
Revenue was 1297.8 + 1106.5 + 1224.7 + 1238.8 = $4,868 Mil.
Gross Profit was 474.7 + 377.8 + 420.1 + 434.5 = $1,707 Mil.
Total Current Assets was $1,543 Mil.
Total Assets was $5,098 Mil.
Property, Plant and Equipment(Net PPE) was $643 Mil.
Depreciation, Depletion and Amortization(DDA) was $125 Mil.
Selling, General & Admin. Expense(SGA) was $1,082 Mil.
Total Current Liabilities was $718 Mil.
Long-Term Debt was $1,600 Mil.
Net Income was 125.2 + 55.7 + 87.8 + 107.5 = $376 Mil.
Non Operating Income was 0.4 + 0.3 + -0.6 + -0.5 = $-0 Mil.
Cash Flow from Operations was 185.4 + -20.4 + 147 + 208.7 = $521 Mil.
|Accounts Receivable was $574 Mil.
Revenue was 1165.1 + 950.8 + 1039.6 + 1057.7 = $4,213 Mil.
Gross Profit was 410.4 + 316.9 + 341.8 + 368 = $1,437 Mil.
Total Current Assets was $1,530 Mil.
Total Assets was $4,967 Mil.
Property, Plant and Equipment(Net PPE) was $582 Mil.
Depreciation, Depletion and Amortization(DDA) was $101 Mil.
Selling, General & Admin. Expense(SGA) was $1,000 Mil.
Total Current Liabilities was $682 Mil.
Long-Term Debt was $1,390 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)|
|=||(569.3 / 4867.8)||/||(573.5 / 4213.2)|
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)|
|=||(1437.1 / 4213.2)||/||(1707.1 / 4867.8)|
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 - (1542.6 + 643.2) / 5097.9)||/||(1 - (1529.9 + 582) / 4966.5)|
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))|
|=||(101.4 / (101.4 + 582))||/||(124.7 / (124.7 + 643.2))|
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)|
|=||(1082.1 / 4867.8)||/||(1000.4 / 4213.2)|
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)|
|=||((1600.4 + 717.9) / 5097.9)||/||((1389.8 + 682.3) / 4966.5)|
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|
|=||(376.2 - -0.4||-||520.7)||/||5097.9|
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.
Fortune Brands Home & Security Inc has a M-score of -2.65 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