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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 -52.86. And the median was -2.91.
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 * 1.2482||+||0.528 * -94.1704||+||0.404 * 1.0675||+||0.892 * 1.0145||+||0.115 * 0.8069|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0586||+||4.679 * -0.0493||-||0.327 * 1.4085|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $421 Mil.|
Revenue was 715.241 + 748.37 + 700.165 + 619.551 = $2,783 Mil.
Gross Profit was 715.241 + 748.37 + 700.165 + 619.551 = $2,783 Mil.
Total Current Assets was $1,768 Mil.
Total Assets was $8,260 Mil.
Property, Plant and Equipment(Net PPE) was $161 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $2,211 Mil.
Total Current Liabilities was $747 Mil.
Long-Term Debt was $2,222 Mil.
Net Income was 51.439 + 66.441 + 33.452 + -45.273 = $106 Mil.
Non Operating Income was 7.584 + 15.181 + 9.813 + -13.935 = $19 Mil.
Cash Flow from Operations was 209.102 + 303.829 + -165.97 + 148.059 = $495 Mil.
|Accounts Receivable was $333 Mil.
Revenue was 659.557 + 673.086 + 708.65 + 702.346 = $2,744 Mil.
Gross Profit was 659.557 + 673.086 + 708.65 + -260410.894 = $-258,370 Mil.
Total Current Assets was $1,761 Mil.
Total Assets was $6,838 Mil.
Property, Plant and Equipment(Net PPE) was $168 Mil.
Depreciation, Depletion and Amortization(DDA) was $59 Mil.
Selling, General & Admin. Expense(SGA) was $2,059 Mil.
Total Current Liabilities was $689 Mil.
Long-Term Debt was $1,057 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)|
|=||(421.371 / 2783.327)||/||(332.769 / 2743.639)|
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)|
|=||(-258369.601 / 2743.639)||/||(2783.327 / 2783.327)|
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 - (1768.026 + 160.831) / 8259.872)||/||(1 - (1760.821 + 167.741) / 6838.473)|
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))|
|=||(58.734 / (58.734 + 167.741))||/||(76.181 / (76.181 + 160.831))|
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)|
|=||(2210.596 / 2783.327)||/||(2058.529 / 2743.639)|
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)|
|=||((2221.882 + 747.369) / 8259.872)||/||((1056.759 + 688.571) / 6838.473)|
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|
|=||(106.059 - 18.643||-||495.02)||/||8259.872|
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 -52.86 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