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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 -2.37 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 * 0.9788||+||0.528 * 0.9678||+||0.404 * 1.0121||+||0.892 * 1.1497||+||0.115 * 1.1213|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9164||+||4.679 * 0.0044||-||0.327 * 1.1317|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $483 Mil.|
Revenue was 966.2 + 1101.9 + 1125.1 + 1040.4 = $4,234 Mil.
Gross Profit was 314.7 + 376.7 + 384.9 + 377 = $1,453 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 $1,049 Mil.
Total Current Liabilities was $567 Mil.
Long-Term Debt was $475 Mil.
Net Income was 40.8 + 64.2 + 64.2 + 64 = $233 Mil.
Non Operating Income was 0.5 + 6.6 + 0.5 + -6.1 = $2 Mil.
Cash Flow from Operations was -156.6 + 131.6 + 120.3 + 118.4 = $214 Mil.
|Accounts Receivable was $429 Mil.
Revenue was 890 + 947.9 + 909.1 + 935.3 = $3,682 Mil.
Gross Profit was 300.2 + 303.5 + 302.3 + 317.4 = $1,223 Mil.
Total Current Assets was $1,199 Mil.
Total Assets was $3,824 Mil.
Property, Plant and Equipment(Net PPE) was $500 Mil.
Depreciation, Depletion and Amortization(DDA) was $99 Mil.
Selling, General & Admin. Expense(SGA) was $996 Mil.
Total Current Liabilities was $560 Mil.
Long-Term Debt was $298 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)|
|=||(482.9 / 4233.6)||/||(429.1 / 3682.3)|
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)|
|=||(376.7 / 3682.3)||/||(314.7 / 4233.6)|
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 - (1264.7 + 532.1) / 4106.8)||/||(1 - (1199.2 + 499.5) / 3823.8)|
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))|
|=||(98.8 / (98.8 + 499.5))||/||(91.9 / (91.9 + 532.1))|
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)|
|=||(1049.3 / 4233.6)||/||(995.9 / 3682.3)|
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)|
|=||((475 + 566.9) / 4106.8)||/||((297.5 + 559.7) / 3823.8)|
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|
|=||(233.2 - 1.5||-||213.7)||/||4106.8|
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 -2.37 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