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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 -2.53.
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 * 0.9478||+||0.528 * 0.982||+||0.404 * 1.0592||+||0.892 * 1.1619||+||0.115 * 0.9598|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.963||+||4.679 * -0.0252||-||0.327 * 1.4182|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $526 Mil.|
Revenue was 1106.5 + 1224.7 + 1238.8 + 1165.1 = $4,735 Mil.
Gross Profit was 377.8 + 420.1 + 434.5 + 410.4 = $1,643 Mil.
Total Current Assets was $1,481 Mil.
Total Assets was $4,943 Mil.
Property, Plant and Equipment(Net PPE) was $636 Mil.
Depreciation, Depletion and Amortization(DDA) was $122 Mil.
Selling, General & Admin. Expense(SGA) was $1,076 Mil.
Total Current Liabilities was $685 Mil.
Long-Term Debt was $1,619 Mil.
Net Income was 55.7 + 87.8 + 107.5 + 79.7 = $331 Mil.
Non Operating Income was 0.3 + -0.6 + -0.5 + -1.5 = $-2 Mil.
Cash Flow from Operations was -20.4 + 147 + 222.3 + 108.5 = $457 Mil.
|Accounts Receivable was $477 Mil.
Revenue was 950.8 + 1039.6 + 1057.7 + 1027.2 = $4,075 Mil.
Gross Profit was 316.9 + 341.8 + 368 + 361.8 = $1,389 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 $962 Mil.
Total Current Liabilities was $609 Mil.
Long-Term Debt was $734 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)|
|=||(525.5 / 4735.1)||/||(477.2 / 4075.3)|
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)|
|=||(420.1 / 4075.3)||/||(377.8 / 4735.1)|
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 - (1481.3 + 635.7) / 4942.8)||/||(1 - (1336.5 + 543.7) / 4085.3)|
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))|
|=||(99.3 / (99.3 + 543.7))||/||(121.9 / (121.9 + 635.7))|
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)|
|=||(1076.4 / 4735.1)||/||(962 / 4075.3)|
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)|
|=||((1619.2 + 684.9) / 4942.8)||/||((733.7 + 609.1) / 4085.3)|
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|
|=||(330.7 - -2.3||-||457.4)||/||4942.8|
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 -2.62 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