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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 4.25. The lowest was -3.45. And the median was -2.24.
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 * 0.942||+||0.528 * 0.9896||+||0.404 * 1.0289||+||0.892 * 1.0501||+||0.115 * 0.9689|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9421||+||4.679 * 0.0548||-||0.327 * 1.0532|
|This Year (May16) TTM:||Last Year (May15) TTM:|
|Accounts Receivable was $103 Mil.|
Revenue was 4126.386 + 3705.805 + 3544.069 + 3884.913 = $15,261 Mil.
Gross Profit was 572.637 + 489.265 + 464.331 + 521.37 = $2,048 Mil.
Total Current Assets was $2,417 Mil.
Total Assets was $14,790 Mil.
Property, Plant and Equipment(Net PPE) was $2,234 Mil.
Depreciation, Depletion and Amortization(DDA) was $146 Mil.
Selling, General & Admin. Expense(SGA) was $1,151 Mil.
Total Current Liabilities was $1,083 Mil.
Long-Term Debt was $10,511 Mil.
Net Income was 175.36 + 141.027 + 128.199 + 172.228 = $617 Mil.
Non Operating Income was 0.616 + -9.768 + -1.157 + -1.593 = $-12 Mil.
Cash Flow from Operations was 85.364 + 232.686 + -296.835 + -202.298 = $-181 Mil.
|Accounts Receivable was $104 Mil.
Revenue was 4014.888 + 3514.092 + 3405.234 + 3599.194 = $14,533 Mil.
Gross Profit was 543.794 + 475.837 + 446.62 + 463.339 = $1,930 Mil.
Total Current Assets was $2,666 Mil.
Total Assets was $13,671 Mil.
Property, Plant and Equipment(Net PPE) was $1,896 Mil.
Depreciation, Depletion and Amortization(DDA) was $120 Mil.
Selling, General & Admin. Expense(SGA) was $1,163 Mil.
Total Current Liabilities was $1,000 Mil.
Long-Term Debt was $9,176 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)|
|=||(102.541 / 15261.173)||/||(103.663 / 14533.408)|
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)|
|=||(1929.59 / 14533.408)||/||(2047.603 / 15261.173)|
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 - (2416.58 + 2234.385) / 14789.927)||/||(1 - (2665.825 + 1896.348) / 13670.677)|
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))|
|=||(119.896 / (119.896 + 1896.348))||/||(146.095 / (146.095 + 2234.385))|
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)|
|=||(1150.986 / 15261.173)||/||(1163.458 / 14533.408)|
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)|
|=||((10511.332 + 1083.374) / 14789.927)||/||((9176.253 + 999.573) / 13670.677)|
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|
|=||(616.814 - -11.902||-||-181.083)||/||14789.927|
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 -2.24 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
CarMax Inc Annual Data
CarMax Inc Quarterly Data