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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 & Co Inc was -1.94. The lowest was -3.04. And the median was -2.59.
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 & Co 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 * 1.0245||+||0.528 * 0.9758||+||0.404 * 0.9824||+||0.892 * 1.0277||+||0.115 * 1.0227|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0102||+||4.679 * -0.0283||-||0.327 * 1.0328|
|This Year (Aug16) TTM:||Last Year (Aug15) TTM:|
|Accounts Receivable was $445 Mil.|
Revenue was 1091 + 1063.3 + 1030.2 + 1201.9 = $4,386 Mil.
Gross Profit was 453.9 + 432.8 + 405 + 521.7 = $1,813 Mil.
Total Current Assets was $1,468 Mil.
Total Assets was $4,717 Mil.
Property, Plant and Equipment(Net PPE) was $641 Mil.
Depreciation, Depletion and Amortization(DDA) was $110 Mil.
Selling, General & Admin. Expense(SGA) was $1,167 Mil.
Total Current Liabilities was $1,341 Mil.
Long-Term Debt was $1,058 Mil.
Net Income was 127.8 + 93.8 + 94.1 + 149.2 = $465 Mil.
Non Operating Income was 0.2 + 0.7 + 1.1 + 0.5 = $3 Mil.
Cash Flow from Operations was 109.7 + 134.8 + 77.9 + 273.4 = $596 Mil.
|Accounts Receivable was $423 Mil.
Revenue was 1059.9 + 1024.1 + 1010.4 + 1173.6 = $4,268 Mil.
Gross Profit was 421.9 + 404 + 389.7 + 506.1 = $1,722 Mil.
Total Current Assets was $1,375 Mil.
Total Assets was $4,491 Mil.
Property, Plant and Equipment(Net PPE) was $589 Mil.
Depreciation, Depletion and Amortization(DDA) was $103 Mil.
Selling, General & Admin. Expense(SGA) was $1,124 Mil.
Total Current Liabilities was $1,405 Mil.
Long-Term Debt was $807 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)|
|=||(445.3 / 4386.4)||/||(422.9 / 4268)|
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)|
|=||(1721.7 / 4268)||/||(1813.4 / 4386.4)|
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 - (1468 + 641.1) / 4716.5)||/||(1 - (1374.5 + 589.1) / 4490.7)|
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))|
|=||(103.3 / (103.3 + 589.1))||/||(109.5 / (109.5 + 641.1))|
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)|
|=||(1167.1 / 4386.4)||/||(1124.1 / 4268)|
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)|
|=||((1057.9 + 1341.2) / 4716.5)||/||((807.2 + 1404.6) / 4490.7)|
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|
|=||(464.9 - 2.5||-||595.8)||/||4716.5|
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 & Co Inc has a M-score of -2.59 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 & Co Inc Annual Data
McCormick & Co Inc Quarterly Data