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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.
Fortune Brands Home & Security Inc has a M-score of -2.42 suggests that the company is not a manipulator.
During the past 5 years, the highest Beneish M-Score of Fortune Brands Home & Security Inc was -2.37. The lowest was -2.64. And the median was -2.43.
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 * 0.9356||+||0.528 * 0.9945||+||0.404 * 0.9591||+||0.892 * 1.1447||+||0.115 * 1.0419|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8901||+||4.679 * 0.0082||-||0.327 * 1.1689|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $535 Mil.|
Revenue was 1142.2 + 966.2 + 1101.9 + 1125.1 = $4,335 Mil.
Gross Profit was 400.4 + 314.7 + 376.7 + 384.9 = $1,477 Mil.
Total Current Assets was $1,337 Mil.
Total Assets was $4,190 Mil.
Property, Plant and Equipment(Net PPE) was $540 Mil.
Depreciation, Depletion and Amortization(DDA) was $95 Mil.
Selling, General & Admin. Expense(SGA) was $1,041 Mil.
Total Current Liabilities was $645 Mil.
Long-Term Debt was $595 Mil.
Net Income was 93.3 + 40.8 + 64.2 + 64.2 = $263 Mil.
Non Operating Income was -0.8 + 0.5 + 6.6 + 0.5 = $7 Mil.
Cash Flow from Operations was 125.9 + -156.6 + 131.6 + 120.3 = $221 Mil.
|Accounts Receivable was $500 Mil.
Revenue was 1040.4 + 890 + 947.9 + 909.1 = $3,787 Mil.
Gross Profit was 377 + 300.2 + 303.5 + 302.3 = $1,283 Mil.
Total Current Assets was $1,204 Mil.
Total Assets was $4,065 Mil.
Property, Plant and Equipment(Net PPE) was $522 Mil.
Depreciation, Depletion and Amortization(DDA) was $97 Mil.
Selling, General & Admin. Expense(SGA) was $1,021 Mil.
Total Current Liabilities was $672 Mil.
Long-Term Debt was $358 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)|
|=||(535.3 / 4335.4)||/||(499.8 / 3787.4)|
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)|
|=||(314.7 / 3787.4)||/||(400.4 / 4335.4)|
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 - (1337.1 + 540.2) / 4190.1)||/||(1 - (1203.6 + 522.2) / 4065.4)|
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))|
|=||(96.6 / (96.6 + 522.2))||/||(95.2 / (95.2 + 540.2))|
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)|
|=||(1040.6 / 4335.4)||/||(1021.3 / 3787.4)|
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)|
|=||((595 + 644.9) / 4190.1)||/||((357.5 + 671.7) / 4065.4)|
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|
|=||(262.5 - 6.8||-||221.2)||/||4190.1|
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 -2.42 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