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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 -2.58.
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 * 0.881||+||0.528 * 0.9993||+||0.404 * 0.9688||+||0.892 * 1.0186||+||0.115 * 1.0635|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0091||+||4.679 * -0.023||-||0.327 * 1.0549|
|This Year (Feb15) TTM:||Last Year (Feb14) TTM:|
|Accounts Receivable was $384 Mil.|
Revenue was 1010.4 + 1173.6 + 1042.8 + 1033.4 = $4,260 Mil.
Gross Profit was 389.7 + 506.1 + 420.1 + 412.5 = $1,728 Mil.
Total Current Assets was $1,305 Mil.
Total Assets was $4,198 Mil.
Property, Plant and Equipment(Net PPE) was $581 Mil.
Depreciation, Depletion and Amortization(DDA) was $101 Mil.
Selling, General & Admin. Expense(SGA) was $1,123 Mil.
Total Current Liabilities was $1,221 Mil.
Long-Term Debt was $807 Mil.
Net Income was 71.7 + 148 + 122.9 + 84.5 = $427 Mil.
Non Operating Income was -0.2 + 0.3 + 0.3 + 0.3 = $1 Mil.
Cash Flow from Operations was 95.9 + 227.8 + 93.7 + 105.4 = $523 Mil.
|Accounts Receivable was $428 Mil.
Revenue was 993.4 + 1170 + 1016.4 + 1002.6 = $4,182 Mil.
Gross Profit was 391.5 + 502.2 + 407.6 + 394.4 = $1,696 Mil.
Total Current Assets was $1,340 Mil.
Total Assets was $4,430 Mil.
Property, Plant and Equipment(Net PPE) was $571 Mil.
Depreciation, Depletion and Amortization(DDA) was $107 Mil.
Selling, General & Admin. Expense(SGA) was $1,092 Mil.
Total Current Liabilities was $1,012 Mil.
Long-Term Debt was $1,017 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)|
|=||(384.1 / 4260.2)||/||(428 / 4182.4)|
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)|
|=||(506.1 / 4182.4)||/||(389.7 / 4260.2)|
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 - (1304.7 + 580.6) / 4197.5)||/||(1 - (1340.1 + 571) / 4429.7)|
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))|
|=||(106.6 / (106.6 + 571))||/||(100.8 / (100.8 + 580.6))|
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)|
|=||(1122.7 / 4260.2)||/||(1092.3 / 4182.4)|
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)|
|=||((806.8 + 1221) / 4197.5)||/||((1016.6 + 1012.1) / 4429.7)|
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|
|=||(427.1 - 0.7||-||522.8)||/||4197.5|
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 -2.71 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