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Fortune Brands Home & Security Inc (NYSE:FBHS)
Beneish M-Score
-2.63 (As of Today)

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 -2.63 suggests that the company is not a manipulator.

FBHS' s 10-Year Beneish M-Score Range
Min: -2.64   Max: -2.37
Current: -2.63

-2.64
-2.37

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 -2.44.


Definition

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 * 0.897+0.528 * 1.0026+0.404 * 0.9456+0.892 * 1.151+0.115 * 0.9519
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9241+4.679 * -0.0175-0.327 * 1.3014
=-2.63

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $535 Mil.
Revenue was 1097.7 + 1142.2 + 966.2 + 1309.5 = $4,516 Mil.
Gross Profit was 378.3 + 400.4 + 314.7 + 444.5 = $1,538 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 $1,086 Mil.
Total Current Liabilities was $710 Mil.
Long-Term Debt was $654 Mil.
Net Income was -21.1 + 93.3 + 40.8 + 64.2 = $177 Mil.
Non Operating Income was 0.3 + -0.8 + 0.5 + 6.8 = $7 Mil.
Cash Flow from Operations was 140.9 + 125.9 + -156.6 + 131.6 = $242 Mil.
Accounts Receivable was $518 Mil.
Revenue was 1045 + 1040.4 + 890 + 947.9 = $3,923 Mil.
Gross Profit was 358.9 + 377 + 300.2 + 303.5 = $1,340 Mil.
Total Current Assets was $1,274 Mil.
Total Assets was $4,119 Mil.
Property, Plant and Equipment(Net PPE) was $514 Mil.
Depreciation, Depletion and Amortization(DDA) was $89 Mil.
Selling, General & Admin. Expense(SGA) was $1,021 Mil.
Total Current Liabilities was $708 Mil.
Long-Term Debt was $350 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(534.5 / 4515.6) / (517.7 / 3923.3)
=0.11836744 / 0.13195524
=0.897

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(400.4 / 3923.3) / (378.3 / 4515.6)
=0.34144725 / 0.3405749
=1.0026

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (1362.9 + 533.3) / 4081.2) / (1 - (1273.6 + 513.5) / 4119.3)
=0.53538175 / 0.56616415
=0.9456

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=4515.6 / 3923.3
=1.151

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))
=(88.5 / (88.5 + 513.5)) / (97.4 / (97.4 + 533.3))
=0.14700997 / 0.15443158
=0.9519

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)
=(1085.7 / 4515.6) / (1020.8 / 3923.3)
=0.24043317 / 0.26018913
=0.9241

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)
=((653.8 + 710.2) / 4081.2) / ((350 + 707.9) / 4119.3)
=0.33421543 / 0.25681548
=1.3014

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(177.2 - 6.8 - 241.8) / 4081.2
=-0.0175

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 -2.63 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Fortune Brands Home & Security Inc Annual Data

Dec09Dec10Dec11Dec12Dec13
DSRI 1.0794
GMI 0.9414
AQI 1.0053
SGI 1.1577
DEPI 1.1464
SGAI 0.9223
LVGI 1.0852
TATA -0.0166
M-score -2.37

Fortune Brands Home & Security Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 1.04841.12631.14071.04730.95020.90890.897
GMI 0.91240.90640.90960.94290.96910.99561.0026
AQI 0.93910.99830.99741.00531.01210.95910.9456
SGI 1.0791.09521.11481.19321.18431.17841.151
DEPI 1.07541.12991.2721.14641.12131.04190.9519
SGAI 0.99890.98850.95140.93130.92570.90.9241
LVGI 0.88281.00811.03721.08521.13171.16891.3014
TATA -0.0291-0.0275-0.0342-0.01660.00430.0082-0.0175
M-score -2.52-2.44-2.43-2.37-2.37-2.42-2.63
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