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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 -2.75.
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 * 0.9989||+||0.404 * 0.6233||+||0.892 * 1.0507||+||0.115 * 0.9783|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0116||+||4.679 * -0.0671||-||0.327 * 1.1093|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 13236 + 14360 + 17348 + 14129 = $59,073 Mil.
Gross Profit was 4588 + 4990 + 5981 + 5012 = $20,571 Mil.
Total Current Assets was $10,561 Mil.
Total Assets was $31,266 Mil.
Property, Plant and Equipment(Net PPE) was $19,577 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,587 Mil.
Selling, General & Admin. Expense(SGA) was $14,116 Mil.
Total Current Liabilities was $10,492 Mil.
Long-Term Debt was $11,545 Mil.
Net Income was 11 + 736 + 1126 + 673 = $2,546 Mil.
Non Operating Income was 0 + -139 + 0 + 0 = $-139 Mil.
Cash Flow from Operations was 238 + 382 + 1686 + 2478 = $4,784 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 12541 + 13681 + 16599 + 13403 = $56,224 Mil.
Gross Profit was 4347 + 4718 + 5735 + 4758 = $19,558 Mil.
Total Current Assets was $9,851 Mil.
Total Assets was $31,721 Mil.
Property, Plant and Equipment(Net PPE) was $20,034 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,586 Mil.
Selling, General & Admin. Expense(SGA) was $13,281 Mil.
Total Current Liabilities was $9,348 Mil.
Long-Term Debt was $10,806 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 / 59073)||/||(0 / 56224)|
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)|
|=||(4990 / 56224)||/||(4588 / 59073)|
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 - (10561 + 19577) / 31266)||/||(1 - (9851 + 20034) / 31721)|
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))|
|=||(1586 / (1586 + 20034))||/||(1587 / (1587 + 19577))|
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)|
|=||(14116 / 59073)||/||(13281 / 56224)|
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)|
|=||((11545 + 10492) / 31266)||/||((10806 + 9348) / 31721)|
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|
|=||(2546 - -139||-||4784)||/||31266|
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 -2.94 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