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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 CarMax Inc was 3.15. The lowest was -3.48. And the median was -2.35.
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 CarMax 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 * 1.1552||+||0.528 * 1.0208||+||0.404 * 1.0376||+||0.892 * 1.1221||+||0.115 * 1.0068|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9721||+||4.679 * 0.1137||-||0.327 * 1.0661|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Nov14) TTM:||Last Year (Nov13) TTM:|
|Accounts Receivable was $88 Mil.|
Revenue was 3405.234 + 3599.194 + 3750.196 + 3076.283 = $13,831 Mil.
Gross Profit was 446.62 + 463.339 + 501.731 + 384.141 = $1,796 Mil.
Total Current Assets was $2,573 Mil.
Total Assets was $12,843 Mil.
Property, Plant and Equipment(Net PPE) was $1,834 Mil.
Depreciation, Depletion and Amortization(DDA) was $113 Mil.
Selling, General & Admin. Expense(SGA) was $1,225 Mil.
Total Current Liabilities was $928 Mil.
Long-Term Debt was $8,550 Mil.
Net Income was 130.049 + 154.518 + 169.653 + 99.209 = $553 Mil.
Non Operating Income was -1.536 + -0.283 + 0.277 + -0.254 = $-2 Mil.
Cash Flow from Operations was -347.996 + -227.539 + -209.08 + -120.023 = $-905 Mil.
|Accounts Receivable was $68 Mil.
Revenue was 2941.407 + 3245.552 + 3311.057 + 2827.948 = $12,326 Mil.
Gross Profit was 381.721 + 434.743 + 448.096 + 369.235 = $1,634 Mil.
Total Current Assets was $2,559 Mil.
Total Assets was $11,304 Mil.
Property, Plant and Equipment(Net PPE) was $1,589 Mil.
Depreciation, Depletion and Amortization(DDA) was $99 Mil.
Selling, General & Admin. Expense(SGA) was $1,123 Mil.
Total Current Liabilities was $749 Mil.
Long-Term Debt was $7,076 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)|
|=||(88.18 / 13830.907)||/||(68.027 / 12325.964)|
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)|
|=||(463.339 / 12325.964)||/||(446.62 / 13830.907)|
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 - (2573.252 + 1833.6) / 12843.406)||/||(1 - (2558.794 + 1588.633) / 11303.875)|
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))|
|=||(98.545 / (98.545 + 1588.633))||/||(112.922 / (112.922 + 1833.6))|
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)|
|=||(1225.17 / 13830.907)||/||(1123.236 / 12325.964)|
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)|
|=||((8550.397 + 928.182) / 12843.406)||/||((7076.325 + 748.601) / 11303.875)|
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|
|=||(553.429 - -1.796||-||-904.638)||/||12843.406|
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.
CarMax Inc has a M-score of -1.69 signals that the company is likely to 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
CarMax Inc Annual Data
CarMax Inc Quarterly Data