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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 -2.64 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 -2.44.
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 * 0.9595||+||0.528 * 0.9996||+||0.404 * 0.9456||+||0.892 * 1.0761||+||0.115 * 0.9519|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9067||+||4.679 * -0.0174||-||0.327 * 1.3014|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $535 Mil.|
Revenue was 1097.7 + 1142.2 + 966.2 + 1101.9 = $4,308 Mil.
Gross Profit was 378.3 + 400.4 + 314.7 + 376.7 = $1,470 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 $1,019 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 + 6.6 = $7 Mil.
Cash Flow from Operations was 140.9 + 125.9 + -156.6 + 131.6 = $242 Mil.
|Accounts Receivable was $518 Mil.
Revenue was 1125.1 + 1040.4 + 890 + 947.9 = $4,003 Mil.
Gross Profit was 384.9 + 377 + 300.2 + 303.5 = $1,366 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 $1,045 Mil.
Total Current Liabilities was $708 Mil.
Long-Term Debt was $350 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)|
|=||(534.5 / 4308)||/||(517.7 / 4003.4)|
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)|
|=||(400.4 / 4003.4)||/||(378.3 / 4308)|
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 - (1362.9 + 533.3) / 4081.2)||/||(1 - (1273.6 + 513.5) / 4119.3)|
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))|
|=||(88.5 / (88.5 + 513.5))||/||(97.4 / (97.4 + 533.3))|
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)|
|=||(1019.3 / 4308)||/||(1044.7 / 4003.4)|
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)|
|=||((653.8 + 710.2) / 4081.2)||/||((350 + 707.9) / 4119.3)|
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|
|=||(177.2 - 6.6||-||241.8)||/||4081.2|
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 -2.64 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