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Fortune Brands Home & Security Inc (NYSE:FBHS)
Beneish M-Score
-2.80 (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 -2.80 suggests that the company is not a manipulator.

FBHS' s 10-Year Beneish M-Score Range
Min: -2.8   Max: -2.38
Current: -2.8

-2.8
-2.38

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.


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 * 0.9162+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
=-2.80

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

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

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)
=(477.2 / 4131) / (482.9 / 3830.2)
=0.11551682 / 0.12607697
=0.9162

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)
=(317.1 / 3830.2) / (316.9 / 4131)
=0.34776252 / 0.34197531
=1.0169

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 - (1336.5 + 543.7) / 4085.3) / (1 - (1264.7 + 532.1) / 4106.8)
=0.53976452 / 0.56248174
=0.9596

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
=4131 / 3830.2
=1.0785

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))
=0.14727564 / 0.15443235
=0.9537

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)
=0.23786008 / 0.25163177
=0.9453

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)
=0.32869067 / 0.25370118
=1.2956

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
=(157.3 - -3.3 - 343.6) / 4085.3
=-0.0448

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.


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

Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.02321.0513
GMI 0.93171.0268
AQI 1.03390.958
SGI 1.03131.0837
DEPI 1.02521.0458
SGAI 0.93170.9273
LVGI 1.08551.272
TATA -0.015-0.0233
M-score -2.54-2.54

Fortune Brands Home & Security Inc Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
DSRI 1.04841.12631.14070.98921.08191.03161.01651.07260.9162
GMI 0.91110.90410.92010.93360.95540.98270.98961.02081.0169
AQI 0.93910.99830.99741.03391.01210.95910.94560.9580.9596
SGI 1.0791.09521.11481.06681.04021.03821.01571.06221.0785
DEPI 1.07541.12991.2721.02521.12131.04190.95191.04580.9537
SGAI 0.99710.98580.96210.94150.93040.90080.92370.92490.9453
LVGI 0.88281.00811.03721.08551.13171.16891.30141.2721.2956
TATA -0.0291-0.0275-0.0342-0.01510.00590.0097-0.0159-0.0233-0.0448
M-score -2.53-2.44-2.43-2.54-2.38-2.43-2.64-2.54-2.80
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