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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 McCormick & Company Inc was -2.03. The lowest was -3.04. And the median was -2.57.
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 McCormick & Company 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 * 0.997||+||0.528 * 0.9862||+||0.404 * 0.9942||+||0.892 * 1.0343||+||0.115 * 1.009|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1||+||4.679 * -0.0215||-||0.327 * 0.9823|
|This Year (Aug14) TTM:||Last Year (Aug13) TTM:|
|Accounts Receivable was $477 Mil.|
Revenue was 1042.8 + 1033.4 + 993.4 + 1170 = $4,240 Mil.
Gross Profit was 420.1 + 412.5 + 391.5 + 502.2 = $1,726 Mil.
Total Current Assets was $1,409 Mil.
Total Assets was $4,472 Mil.
Property, Plant and Equipment(Net PPE) was $579 Mil.
Depreciation, Depletion and Amortization(DDA) was $107 Mil.
Selling, General & Admin. Expense(SGA) was $1,106 Mil.
Total Current Liabilities was $1,078 Mil.
Long-Term Debt was $1,014 Mil.
Net Income was 122.9 + 84.5 + 82.5 + 128.7 = $419 Mil.
Non Operating Income was 0.3 + 0.3 + 0.2 + 0.5 = $1 Mil.
Cash Flow from Operations was 93.7 + 105.4 + 76.7 + 237.8 = $514 Mil.
|Accounts Receivable was $462 Mil.
Revenue was 1016.4 + 1002.6 + 934.4 + 1145.8 = $4,099 Mil.
Gross Profit was 407.6 + 394.4 + 361.7 + 482.4 = $1,646 Mil.
Total Current Assets was $1,371 Mil.
Total Assets was $4,353 Mil.
Property, Plant and Equipment(Net PPE) was $550 Mil.
Depreciation, Depletion and Amortization(DDA) was $103 Mil.
Selling, General & Admin. Expense(SGA) was $1,069 Mil.
Total Current Liabilities was $1,054 Mil.
Long-Term Debt was $1,019 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)|
|=||(476.8 / 4239.6)||/||(462.4 / 4099.2)|
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)|
|=||(412.5 / 4099.2)||/||(420.1 / 4239.6)|
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 - (1408.8 + 578.8) / 4472.1)||/||(1 - (1370.9 + 549.7) / 4353)|
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))|
|=||(102.9 / (102.9 + 549.7))||/||(107.2 / (107.2 + 578.8))|
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)|
|=||(1106 / 4239.6)||/||(1069.4 / 4099.2)|
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)|
|=||((1014.3 + 1077.6) / 4472.1)||/||((1018.6 + 1054.3) / 4353)|
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|
|=||(418.6 - 1.3||-||513.6)||/||4472.1|
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.
McCormick & Company Inc has a M-score of -2.56 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
McCormick & Company Inc Annual Data
McCormick & Company Inc Quarterly Data