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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 Legg Mason Inc was -1.61. The lowest was -3.85. And the median was -2.66.
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 * 0.9632||+||0.528 * 1||+||0.404 * 0.9409||+||0.892 * 0.9439||+||0.115 * 0.8704|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0351||+||4.679 * -0.0593||-||0.327 * 1.3016|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $335 Mil.|
Revenue was 619.551 + 659.557 + 673.086 + 708.65 = $2,661 Mil.
Gross Profit was 619.551 + 659.557 + 673.086 + 708.65 = $2,661 Mil.
Total Current Assets was $2,385 Mil.
Total Assets was $7,520 Mil.
Property, Plant and Equipment(Net PPE) was $163 Mil.
Depreciation, Depletion and Amortization(DDA) was $60 Mil.
Selling, General & Admin. Expense(SGA) was $2,071 Mil.
Total Current Liabilities was $842 Mil.
Long-Term Debt was $1,741 Mil.
Net Income was -45.273 + -138.626 + 64.319 + 94.548 = $-25 Mil.
Non Operating Income was -13.935 + 5.01 + -30.413 + 6.118 = $-33 Mil.
Cash Flow from Operations was 148.059 + 154.684 + 149.038 + 2.67 = $454 Mil.
|Accounts Receivable was $368 Mil.
Revenue was 702.346 + 718.984 + 703.895 + 693.881 = $2,819 Mil.
Gross Profit was 702.346 + 718.984 + 703.895 + 693.881 = $2,819 Mil.
Total Current Assets was $1,921 Mil.
Total Assets was $7,065 Mil.
Property, Plant and Equipment(Net PPE) was $180 Mil.
Depreciation, Depletion and Amortization(DDA) was $55 Mil.
Selling, General & Admin. Expense(SGA) was $2,120 Mil.
Total Current Liabilities was $815 Mil.
Long-Term Debt was $1,049 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)|
|=||(334.922 / 2660.844)||/||(368.399 / 2819.106)|
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)|
|=||(659.557 / 2819.106)||/||(619.551 / 2660.844)|
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 - (2385.128 + 163.305) / 7520.446)||/||(1 - (1921.287 + 179.606) / 7064.834)|
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))|
|=||(55.086 / (55.086 + 179.606))||/||(60.297 / (60.297 + 163.305))|
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)|
|=||(2070.994 / 2660.844)||/||(2119.704 / 2819.106)|
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)|
|=||((1740.985 + 841.553) / 7520.446)||/||((1048.946 + 815.046) / 7064.834)|
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|
|=||(-25.032 - -33.22||-||454.451)||/||7520.446|
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 -2.98 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