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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.
McCormick & Company, Inc. has a M-score of -2.55 suggests that the company is not a 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 * 1.0241||+||0.528 * 0.9911||+||0.404 * 0.9919||+||0.892 * 1.0348||+||0.115 * 1.0319|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0088||+||4.679 * -0.0267||-||0.327 * 0.9893|
|This Year (Feb14) TTM:||Last Year (Feb13) TTM:|
|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.
Net Income was 82.5 + 127.6 + 104.6 + 79 = $394 Mil.
Non Operating Income was 0.2 + 0.5 + 0.3 + 0.8 = $2 Mil.
Cash Flow from Operations was 76.7 + 237.8 + 94.7 + 101.1 = $510 Mil.
|Accounts Receivable was $404 Mil.
Revenue was 934.4 + 1145.8 + 977.7 + 984 = $4,042 Mil.
Gross Profit was 361.7 + 482.4 + 391.7 + 388.4 = $1,624 Mil.
Total Current Assets was $1,212 Mil.
Total Assets was $4,086 Mil.
Property, Plant and Equipment(Net PPE) was $533 Mil.
Depreciation, Depletion and Amortization(DDA) was $103 Mil.
Selling, General & Admin. Expense(SGA) was $1,046 Mil.
Total Current Liabilities was $1,116 Mil.
Long-Term Debt was $776 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)|
|=||(428 / 4182.4)||/||(403.9 / 4041.9)|
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)|
|=||(502.2 / 4041.9)||/||(391.5 / 4182.4)|
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 - (1340.1 + 571) / 4429.7)||/||(1 - (1211.5 + 532.5) / 4086.1)|
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))|
|=||(103.2 / (103.2 + 532.5))||/||(106.6 / (106.6 + 571))|
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)|
|=||(1092.3 / 4182.4)||/||(1046.4 / 4041.9)|
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)|
|=||((1016.6 + 1012.1) / 4429.7)||/||((776 + 1115.5) / 4086.1)|
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|
|=||(393.7 - 1.8||-||510.3)||/||4429.7|
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 -2.55 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