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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 13 years, the highest Beneish M-Score of W W Grainger Inc was -1.89. The lowest was -3.28. And the median was -2.54.
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 W W Grainger 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 * 0.98||+||0.528 * 1.0116||+||0.404 * 0.8646||+||0.892 * 1.0381||+||0.115 * 0.9368|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9795||+||4.679 * -0.0308||-||0.327 * 1.4008|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $1,198 Mil.|
Revenue was 2522.565 + 2439.661 + 2510.959 + 2562.263 = $10,035 Mil.
Gross Profit was 1073.432 + 1093.743 + 1054.801 + 1102.784 = $4,325 Mil.
Total Current Assets was $3,524 Mil.
Total Assets was $5,827 Mil.
Property, Plant and Equipment(Net PPE) was $1,325 Mil.
Depreciation, Depletion and Amortization(DDA) was $221 Mil.
Selling, General & Admin. Expense(SGA) was $2,965 Mil.
Total Current Liabilities was $1,047 Mil.
Long-Term Debt was $1,349 Mil.
Net Income was 220.548 + 211.015 + 148.839 + 230.322 = $811 Mil.
Non Operating Income was -4.124 + -2.164 + -3.089 + -1.131 = $-11 Mil.
Cash Flow from Operations was 213.296 + 156.209 + 296.981 + 334.367 = $1,001 Mil.
|Accounts Receivable was $1,178 Mil.
Revenue was 2506.104 + 2385.627 + 2377.232 + 2398.53 = $9,667 Mil.
Gross Profit was 1080.686 + 1075.971 + 1006.397 + 1051.366 = $4,214 Mil.
Total Current Assets was $3,031 Mil.
Total Assets was $5,311 Mil.
Property, Plant and Equipment(Net PPE) was $1,249 Mil.
Depreciation, Depletion and Amortization(DDA) was $194 Mil.
Selling, General & Admin. Expense(SGA) was $2,916 Mil.
Total Current Liabilities was $1,126 Mil.
Long-Term Debt was $432 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)|
|=||(1197.856 / 10035.448)||/||(1177.543 / 9667.493)|
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)|
|=||(1093.743 / 9667.493)||/||(1073.432 / 10035.448)|
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 - (3523.746 + 1324.551) / 5826.909)||/||(1 - (3030.553 + 1249.088) / 5311.312)|
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))|
|=||(193.596 / (193.596 + 1249.088))||/||(221.467 / (221.467 + 1324.551))|
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)|
|=||(2964.769 / 10035.448)||/||(2915.852 / 9667.493)|
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)|
|=||((1348.642 + 1047.102) / 5826.909)||/||((432.485 + 1126.453) / 5311.312)|
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|
|=||(810.724 - -10.508||-||1000.853)||/||5826.909|
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.
W W Grainger Inc has a M-score of -2.79 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
W W Grainger Inc Annual Data
W W Grainger Inc Quarterly Data