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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 -2.91. And the median was -2.41.
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 * 1.5182||+||0.528 * 0.9912||+||0.404 * 1.0457||+||0.892 * 1.1348||+||0.115 * 0.9972|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9594||+||4.679 * 0.1188||-||0.327 * 1.0598|
|This Year (Feb15) TTM:||Last Year (Feb14) TTM:|
|Accounts Receivable was $138 Mil.|
Revenue was 3514.092 + 3405.234 + 3599.194 + 3750.196 = $14,269 Mil.
Gross Profit was 475.837 + 446.62 + 463.339 + 501.731 = $1,888 Mil.
Total Current Assets was $2,599 Mil.
Total Assets was $13,198 Mil.
Property, Plant and Equipment(Net PPE) was $1,863 Mil.
Depreciation, Depletion and Amortization(DDA) was $115 Mil.
Selling, General & Admin. Expense(SGA) was $1,258 Mil.
Total Current Liabilities was $997 Mil.
Long-Term Debt was $8,819 Mil.
Net Income was 143.138 + 130.049 + 154.518 + 169.653 = $597 Mil.
Non Operating Income was -1.196 + -1.536 + -0.283 + 0.277 = $-3 Mil.
Cash Flow from Operations was -183.515 + -347.996 + -227.539 + -209.08 = $-968 Mil.
|Accounts Receivable was $80 Mil.
Revenue was 3076.283 + 2941.407 + 3245.552 + 3311.057 = $12,574 Mil.
Gross Profit was 384.141 + 381.721 + 434.743 + 448.096 = $1,649 Mil.
Total Current Assets was $2,643 Mil.
Total Assets was $11,707 Mil.
Property, Plant and Equipment(Net PPE) was $1,653 Mil.
Depreciation, Depletion and Amortization(DDA) was $102 Mil.
Selling, General & Admin. Expense(SGA) was $1,155 Mil.
Total Current Liabilities was $875 Mil.
Long-Term Debt was $7,340 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)|
|=||(137.69 / 14268.716)||/||(79.923 / 12574.299)|
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)|
|=||(446.62 / 12574.299)||/||(475.837 / 14268.716)|
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 - (2599.038 + 1862.538) / 13198.201)||/||(1 - (2643.224 + 1652.977) / 11707.157)|
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))|
|=||(101.911 / (101.911 + 1652.977))||/||(115.173 / (115.173 + 1862.538))|
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)|
|=||(1257.725 / 14268.716)||/||(1155.215 / 12574.299)|
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)|
|=||((8818.75 + 997.173) / 13198.201)||/||((7340.431 + 875.497) / 11707.157)|
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|
|=||(597.358 - -2.738||-||-968.13)||/||13198.201|
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 -1.33 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