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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.
Legg Mason, Inc. has a M-score of -2.36 suggests that the company is not a manipulator.
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.
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|
|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
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)|
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)|
|=||(669.852 / 2593.478)||/||(720.092 / 2728.124)|
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 - (1885.263 + 192.045) / 7005.627)||/||(1 - (1829.585 + 226.741) / 7115.06)|
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))|
|=||(68.442 / (68.442 + 226.741))||/||(86.284 / (86.284 + 192.045))|
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)|
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)|
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|
|=||(245.041 - 49.42||-||529.01)||/||7005.627|
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.
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
Legg Mason, Inc. Annual Data
Legg Mason, Inc. Quarterly Data