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Legg Mason Inc (NYSE:LM)
Beneish M-Score
-2.58 (As of Today)

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.

Legg Mason Inc has a M-score of -2.58 suggests that the company is not a manipulator.

LM' s 10-Year Beneish M-Score Range
Min: -3.94   Max: -2.45
Current: -2.58

-3.94
-2.45

During the past 13 years, the highest Beneish M-Score of Legg Mason Inc was -2.45. The lowest was -3.94. And the median was -2.74.


Definition

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 Legg Mason 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 * 0.9304+0.528 * 1+0.404 * 1.0185+0.892 * 1.0257+0.115 * 1.332
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9547+4.679 * -0.0277-0.327 * 0.9407
=-2.58

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $361 Mil.
Revenue was 718.984 + 703.895 + 693.881 + 681.396 = $2,798 Mil.
Gross Profit was 718.984 + 703.895 + 693.881 + 681.396 = $2,798 Mil.
Total Current Assets was $1,813 Mil.
Total Assets was $7,043 Mil.
Property, Plant and Equipment(Net PPE) was $184 Mil.
Depreciation, Depletion and Amortization(DDA) was $56 Mil.
Selling, General & Admin. Expense(SGA) was $2,113 Mil.
Total Current Liabilities was $711 Mil.
Long-Term Debt was $1,056 Mil.
Net Income was 77.036 + 4.897 + 72.188 + 68.947 = $223 Mil.
Non Operating Income was 9.2 + -108.235 + 9.255 + 5.225 = $-85 Mil.
Cash Flow from Operations was 249.426 + 139.445 + -7.824 + 121.97 = $503 Mil.
Accounts Receivable was $378 Mil.
Revenue was 720.092 + 669.852 + 670.417 + 667.763 = $2,728 Mil.
Gross Profit was 720.092 + 669.852 + 670.417 + 667.763 = $2,728 Mil.
Total Current Assets was $1,885 Mil.
Total Assets was $7,006 Mil.
Property, Plant and Equipment(Net PPE) was $192 Mil.
Depreciation, Depletion and Amortization(DDA) was $86 Mil.
Selling, General & Admin. Expense(SGA) was $2,158 Mil.
Total Current Liabilities was $729 Mil.
Long-Term Debt was $1,139 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(360.69 / 2798.156) / (377.97 / 2728.124)
=0.12890275 / 0.13854576
=0.9304

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(703.895 / 2728.124) / (718.984 / 2798.156)
=1 / 1
=1

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (1813.374 + 183.655) / 7043.23) / (1 - (1885.263 + 192.045) / 7005.627)
=0.7164612 / 0.70348007
=1.0185

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=2798.156 / 2728.124
=1.0257

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))
=(86.284 / (86.284 + 192.045)) / (55.709 / (55.709 + 183.655))
=0.31000722 / 0.23273759
=1.332

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)
=(2112.784 / 2798.156) / (2157.596 / 2728.124)
=0.75506298 / 0.79087168
=0.9547

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)
=((1056.215 + 711.121) / 7043.23) / ((1139.171 + 729.478) / 7005.627)
=0.25092692 / 0.26673544
=0.9407

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(223.068 - -84.555 - 503.017) / 7043.23
=-0.0277

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.

Legg Mason Inc has a M-score of -2.58 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Legg Mason Inc Annual Data

Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14
DSRI 2.1720.36970.99330.95221.07090.9472
GMI 111111
AQI 1.13211.01651.03760.9981.02950.9562
SGI 0.72450.78481.05670.95630.98121.0494
DEPI 1.24861.14260.90860.93720.92821.2165
SGAI 1.091.08220.97961.00551.01770.9492
LVGI 1.12650.59211.09240.99060.99010.9485
TATA 0.0016-0.155-0.0252-0.037-0.0875-0.0264
M-score -1.61-3.83-2.58-2.74-2.84-2.58

Legg Mason Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 1.10511.06421.07091.03821.00281.14350.94720.96440.96070.9304
GMI 1111111111
AQI 1.03561.00991.02950.96640.9770.98940.95620.88060.97681.0185
SGI 0.90230.95090.98121.02961.05321.05191.04941.04251.04371.0257
DEPI 1.00061.24470.92820.91130.86350.74791.21651.2221.23751.332
SGAI 1.03221.01241.01771.00860.98610.99170.94920.94120.94390.9547
LVGI 0.93760.95610.99011.04691.01831.01880.94851.16250.9490.9407
TATA -0.017-0.0809-0.0875-0.1243-0.1117-0.0476-0.0264-0.0322-0.0241-0.0277
M-score -2.52-2.80-2.84-3.04-2.98-2.56-2.58-2.69-2.55-2.58
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