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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 Lowe's Companies Inc was -1.74. The lowest was -3.63. And the median was -2.73.
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 Lowe's Companies 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||+||0.528 * 1.0016||+||0.404 * 1.3661||+||0.892 * 1.0588||+||0.115 * 1.0275|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.005||+||4.679 * -0.0745||-||0.327 * 1.1102|
|This Year (Jul16) TTM:||Last Year (Jul15) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 18260 + 15234 + 13236 + 14360 = $61,090 Mil.
Gross Profit was 6288 + 5337 + 4588 + 4990 = $21,203 Mil.
Total Current Assets was $13,351 Mil.
Total Assets was $36,471 Mil.
Property, Plant and Equipment(Net PPE) was $20,274 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,574 Mil.
Selling, General & Admin. Expense(SGA) was $14,333 Mil.
Total Current Liabilities was $13,183 Mil.
Long-Term Debt was $14,618 Mil.
Net Income was 1167 + 884 + 11 + 736 = $2,798 Mil.
Non Operating Income was 0 + 0 + 406 + -139 = $267 Mil.
Cash Flow from Operations was 1408 + 3220 + 238 + 382 = $5,248 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 17348 + 14129 + 12541 + 13681 = $57,699 Mil.
Gross Profit was 5981 + 5012 + 4347 + 4718 = $20,058 Mil.
Total Current Assets was $11,115 Mil.
Total Assets was $32,736 Mil.
Property, Plant and Equipment(Net PPE) was $19,751 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,579 Mil.
Selling, General & Admin. Expense(SGA) was $13,470 Mil.
Total Current Liabilities was $12,141 Mil.
Long-Term Debt was $10,336 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)|
|=||(0 / 61090)||/||(0 / 57699)|
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)|
|=||(20058 / 57699)||/||(21203 / 61090)|
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 - (13351 + 20274) / 36471)||/||(1 - (11115 + 19751) / 32736)|
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))|
|=||(1579 / (1579 + 19751))||/||(1574 / (1574 + 20274))|
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)|
|=||(14333 / 61090)||/||(13470 / 57699)|
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)|
|=||((14618 + 13183) / 36471)||/||((10336 + 12141) / 32736)|
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|
|=||(2798 - 267||-||5248)||/||36471|
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.
Lowe's Companies Inc has a M-score of -2.66 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
Lowe's Companies Inc Annual Data
Lowe's Companies Inc Quarterly Data