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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 -2.38. 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 * 0.9082||+||0.528 * 1.0118||+||0.404 * 1.0484||+||0.892 * 1.1474||+||0.115 * 1.0262|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9685||+||4.679 * -0.0257||-||0.327 * 1.2454|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $557 Mil.|
Revenue was 1238.8 + 1165.1 + 950.8 + 1039.6 = $4,394 Mil.
Gross Profit was 434.5 + 410.4 + 316.9 + 341.8 = $1,504 Mil.
Total Current Assets was $1,623 Mil.
Total Assets was $5,082 Mil.
Property, Plant and Equipment(Net PPE) was $606 Mil.
Depreciation, Depletion and Amortization(DDA) was $107 Mil.
Selling, General & Admin. Expense(SGA) was $1,031 Mil.
Total Current Liabilities was $778 Mil.
Long-Term Debt was $1,338 Mil.
Net Income was 107.5 + 79.7 + 40 + 45.1 = $272 Mil.
Non Operating Income was -0.5 + -1.5 + -1.7 + -1.2 = $-5 Mil.
Cash Flow from Operations was 222.3 + 108.5 + -66.7 + 143.5 = $408 Mil.
|Accounts Receivable was $535 Mil.
Revenue was 1057.7 + 1027.2 + 889.1 + 855.7 = $3,830 Mil.
Gross Profit was 368 + 361.8 + 295.3 + 300.8 = $1,326 Mil.
Total Current Assets was $1,363 Mil.
Total Assets was $4,081 Mil.
Property, Plant and Equipment(Net PPE) was $533 Mil.
Depreciation, Depletion and Amortization(DDA) was $97 Mil.
Selling, General & Admin. Expense(SGA) was $928 Mil.
Total Current Liabilities was $710 Mil.
Long-Term Debt was $654 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)|
|=||(557 / 4394.3)||/||(534.5 / 3829.7)|
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)|
|=||(410.4 / 3829.7)||/||(434.5 / 4394.3)|
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 - (1623.4 + 606.3) / 5082.2)||/||(1 - (1362.9 + 533.3) / 4081.2)|
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))|
|=||(97.4 / (97.4 + 533.3))||/||(107.4 / (107.4 + 606.3))|
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)|
|=||(1031.2 / 4394.3)||/||(927.9 / 3829.7)|
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)|
|=||((1337.6 + 777.7) / 5082.2)||/||((653.8 + 710.2) / 4081.2)|
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|
|=||(272.3 - -4.9||-||407.6)||/||5082.2|
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 -2.60 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