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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 * 0.9041||+||0.528 * 0.9954||+||0.404 * 0.9944||+||0.892 * 1.0374||+||0.115 * 0.9305|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.4158||+||4.679 * 0.0465||-||0.327 * 1.0453|
|This Year (Aug16) TTM:||Last Year (Aug15) TTM:|
|Accounts Receivable was $95 Mil.|
Revenue was 3997.248 + 4126.386 + 3705.805 + 3544.069 = $15,374 Mil.
Gross Profit was 545.362 + 572.637 + 489.265 + 464.331 = $2,072 Mil.
Total Current Assets was $2,755 Mil.
Total Assets was $15,504 Mil.
Property, Plant and Equipment(Net PPE) was $2,326 Mil.
Depreciation, Depletion and Amortization(DDA) was $155 Mil.
Selling, General & Admin. Expense(SGA) was $1,418 Mil.
Total Current Liabilities was $1,084 Mil.
Long-Term Debt was $11,131 Mil.
Net Income was 162.362 + 175.36 + 141.027 + 128.199 = $607 Mil.
Non Operating Income was 0.435 + 0.616 + -9.768 + -1.157 = $-10 Mil.
Cash Flow from Operations was -125.205 + 85.364 + 232.686 + -296.835 = $-104 Mil.
|Accounts Receivable was $101 Mil.
Revenue was 3884.913 + 4014.888 + 3514.092 + 3405.234 = $14,819 Mil.
Gross Profit was 521.37 + 543.794 + 475.837 + 446.62 = $1,988 Mil.
Total Current Assets was $2,504 Mil.
Total Assets was $13,953 Mil.
Property, Plant and Equipment(Net PPE) was $2,017 Mil.
Depreciation, Depletion and Amortization(DDA) was $125 Mil.
Selling, General & Admin. Expense(SGA) was $965 Mil.
Total Current Liabilities was $1,002 Mil.
Long-Term Debt was $9,514 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)|
|=||(94.577 / 15373.508)||/||(100.832 / 14819.127)|
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)|
|=||(1987.621 / 14819.127)||/||(2071.595 / 15373.508)|
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 - (2755.347 + 2326.178) / 15504.332)||/||(1 - (2503.725 + 2016.52) / 13952.565)|
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))|
|=||(124.595 / (124.595 + 2016.52))||/||(155.185 / (155.185 + 2326.178))|
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)|
|=||(1417.728 / 15373.508)||/||(965.236 / 14819.127)|
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)|
|=||((11130.646 + 1084.363) / 15504.332)||/||((9514.052 + 1001.977) / 13952.565)|
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|
|=||(606.948 - -9.874||-||-103.99)||/||15504.332|
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 -2.42 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