Switch to:
Legg Mason, Inc. (NYSE:LM)
Beneish M-Score
-2.36 (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 -2.36 suggests that the company is not a manipulator.

LM' s 10-Year Beneish M-Score Range
Min: -3.94   Max: -2.36
Current: -2.36

-3.94
-2.36

During the past 13 years, the highest Beneish M-Score of Legg Mason, Inc. was -2.36. The lowest was -3.94. And the median was -2.90.


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 * 1.3625+0.528 * 1+0.404 * 0.9894+0.892 * 1.0519+0.115 * 0.7479
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9917+4.679 * -0.0476-0.327 * 1.0188
=-2.36

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $450 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.
Net Income was 81.734 + 86.288 + 47.815 + 29.204 = $245 Mil.
Non Operating Income was 15.312 + 11.973 + 2.782 + 19.353 = $49 Mil.
Cash Flow from Operations was 215.137 + 178.02 + -77.803 + 213.656 = $529 Mil.
Accounts Receivable was $314 Mil.
Revenue was 673.9 + 640.295 + 630.692 + 648.591 = $2,593 Mil.
Gross Profit was 673.9 + 640.295 + 630.692 + 648.591 = $2,593 Mil.
Total Current Assets was $1,830 Mil.
Total Assets was $7,115 Mil.
Property, Plant and Equipment(Net PPE) was $227 Mil.
Depreciation, Depletion and Amortization(DDA) was $68 Mil.
Selling, General & Admin. Expense(SGA) was $2,068 Mil.
Total Current Liabilities was $518 Mil.
Long-Term Debt was $1,344 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)
=(450.379 / 2728.124) / (314.235 / 2593.478)
=0.16508744 / 0.12116355
=1.3625

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)
=(669.852 / 2593.478) / (720.092 / 2728.124)
=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 - (1885.263 + 192.045) / 7005.627) / (1 - (1829.585 + 226.741) / 7115.06)
=0.70348007 / 0.71098965
=0.9894

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
=2728.124 / 2593.478
=1.0519

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))
=(68.442 / (68.442 + 226.741)) / (86.284 / (86.284 + 192.045))
=0.23186295 / 0.31000722
=0.7479

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)
=(2157.596 / 2728.124) / (2068.188 / 2593.478)
=0.79087168 / 0.79745731
=0.9917

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)
=((1139.171 + 729.478) / 7005.627) / ((1344.435 + 518.297) / 7115.06)
=0.26673544 / 0.26180131
=1.0188

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
=(245.041 - 49.42 - 529.01) / 7005.627
=-0.0476

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 -2.36 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

Mar04Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13
DSRI 2.1720.59360.66841.14550.9939
GMI 11111
AQI 1.13211.01651.03760.9981.0295
SGI 0.72450.78481.05670.95630.9812
DEPI 1.24861.14260.90860.93720.9282
SGAI 1.091.08220.97961.00551.0177
LVGI 1.12650.59211.09240.99060.9901
TATA 0.0016-0.155-0.0252-0.037-0.0875
M-score -1.61-3.63-2.87-2.56-2.91

Legg Mason, Inc. Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.81330.71971.14550.90991.22691.06420.99391.10841.09181.3625
GMI 1111111111
AQI 1.02051.00930.9981.09311.03561.00991.02950.96640.9770.9894
SGI 1.04110.99460.95630.91120.90230.95090.98121.02961.05321.0519
DEPI 0.95080.92590.93720.95691.00061.24470.92820.91130.86350.7479
SGAI 0.99551.01071.00551.00831.03221.01241.01771.00860.98610.9917
LVGI 0.98051.0060.99060.90150.93760.95610.99011.04691.01831.0188
TATA -0.0219-0.0411-0.037-0.0124-0.017-0.0809-0.0875-0.1243-0.1117-0.0476
M-score -2.71-2.94-2.56-2.64-2.41-2.80-2.91-2.98-2.90-2.36
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Hide