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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 Matthews International Corporation was -2.03. The lowest was -3.30. And the median was -2.53.
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 Matthews International Corporation 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 * 1.2604||+||0.528 * 1.0126||+||0.404 * 1.1928||+||0.892 * 1.2329||+||0.115 * 0.9335|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0519||+||4.679 * -0.0171||-||0.327 * 1.0883|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $268 Mil.|
Revenue was 343.584 + 349.832 + 279.983 + 246.837 = $1,220 Mil.
Gross Profit was 124.67 + 116.708 + 104.23 + 90.18 = $436 Mil.
Total Current Assets was $546 Mil.
Total Assets was $1,971 Mil.
Property, Plant and Equipment(Net PPE) was $206 Mil.
Depreciation, Depletion and Amortization(DDA) was $49 Mil.
Selling, General & Admin. Expense(SGA) was $342 Mil.
Total Current Liabilities was $221 Mil.
Long-Term Debt was $705 Mil.
Net Income was 14.951 + 5.164 + 19.263 + 11.333 = $51 Mil.
Non Operating Income was -0.164 + -3.544 + -0.441 + -0.79 = $-5 Mil.
Cash Flow from Operations was 9.292 + 28.852 + 39.939 + 11.336 = $89 Mil.
|Accounts Receivable was $172 Mil.
Revenue was 229.945 + 252.706 + 250.652 + 256.39 = $990 Mil.
Gross Profit was 81.376 + 90.287 + 91.391 + 94.866 = $358 Mil.
Total Current Assets was $408 Mil.
Total Assets was $1,217 Mil.
Property, Plant and Equipment(Net PPE) was $178 Mil.
Depreciation, Depletion and Amortization(DDA) was $39 Mil.
Selling, General & Admin. Expense(SGA) was $264 Mil.
Total Current Liabilities was $174 Mil.
Long-Term Debt was $352 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)|
|=||(267.571 / 1220.236)||/||(172.182 / 989.693)|
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)|
|=||(116.708 / 989.693)||/||(124.67 / 1220.236)|
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 - (546.266 + 205.889) / 1971.472)||/||(1 - (407.971 + 178.119) / 1217.301)|
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))|
|=||(38.979 / (38.979 + 178.119))||/||(49.028 / (49.028 + 205.889))|
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)|
|=||(342.308 / 1220.236)||/||(263.948 / 989.693)|
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)|
|=||((705.481 + 221.452) / 1971.472)||/||((352.218 + 173.704) / 1217.301)|
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|
|=||(50.711 - -4.939||-||89.419)||/||1971.472|
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.
Matthews International Corporation has a M-score of -2.07 signals that the company is likely to 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
Matthews International Corporation Annual Data
Matthews International Corporation Quarterly Data