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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 -2.51.
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 * 1.0797||+||0.528 * 0.9414||+||0.404 * 1.0052||+||0.892 * 1.1577||+||0.115 * 1.1464|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9223||+||4.679 * -0.0166||-||0.327 * 1.0855|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $477 Mil.|
Revenue was 1101.9 + 1125.1 + 1040.4 + 890 = $4,157 Mil.
Gross Profit was 376.7 + 384.9 + 377 + 300.2 = $1,439 Mil.
Total Current Assets was $1,327 Mil.
Total Assets was $4,178 Mil.
Property, Plant and Equipment(Net PPE) was $534 Mil.
Depreciation, Depletion and Amortization(DDA) was $90 Mil.
Selling, General & Admin. Expense(SGA) was $1,043 Mil.
Total Current Liabilities was $739 Mil.
Long-Term Debt was $350 Mil.
Net Income was 64.2 + 64.2 + 64 + 37.3 = $230 Mil.
Non Operating Income was 6.6 + 0.5 + -6.1 + 0.2 = $1 Mil.
Cash Flow from Operations was 131.6 + 120.3 + 118.4 + -72.5 = $298 Mil.
|Accounts Receivable was $382 Mil.
Revenue was 947.9 + 909.1 + 935.3 + 798.8 = $3,591 Mil.
Gross Profit was 303.5 + 302.3 + 317.4 + 246.8 = $1,170 Mil.
Total Current Assets was $1,228 Mil.
Total Assets was $3,874 Mil.
Property, Plant and Equipment(Net PPE) was $509 Mil.
Depreciation, Depletion and Amortization(DDA) was $101 Mil.
Selling, General & Admin. Expense(SGA) was $977 Mil.
Total Current Liabilities was $632 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)|
|=||(477.1 / 4157.4)||/||(381.7 / 3591.1)|
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)|
|=||(384.9 / 3591.1)||/||(376.7 / 4157.4)|
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 - (1327.4 + 534.4) / 4178.1)||/||(1 - (1227.9 + 509.4) / 3873.9)|
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))|
|=||(101.3 / (101.3 + 509.4))||/||(90.4 / (90.4 + 534.4))|
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)|
|=||(1043.1 / 4157.4)||/||(976.9 / 3591.1)|
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)|
|=||((350 + 738.7) / 4178.1)||/||((297.5 + 632.4) / 3873.9)|
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|
|=||(229.7 - 1.2||-||297.8)||/||4178.1|
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