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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 -2.11. The lowest was -3.03. And the median was -2.61.
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 * 0.9953||+||0.528 * 0.9739||+||0.404 * 0.9833||+||0.892 * 1.0268||+||0.115 * 1.0466|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.015||+||4.679 * -0.0413||-||0.327 * 1.0434|
|This Year (Nov16) TTM:||Last Year (Nov15) TTM:|
|Accounts Receivable was $465 Mil.|
Revenue was 1227 + 1091 + 1063.3 + 1030.2 = $4,412 Mil.
Gross Profit was 540 + 453.9 + 432.8 + 405 = $1,832 Mil.
Total Current Assets was $1,422 Mil.
Total Assets was $4,636 Mil.
Property, Plant and Equipment(Net PPE) was $669 Mil.
Depreciation, Depletion and Amortization(DDA) was $109 Mil.
Selling, General & Admin. Expense(SGA) was $1,175 Mil.
Total Current Liabilities was $1,423 Mil.
Long-Term Debt was $1,054 Mil.
Net Income was 155.3 + 127.8 + 93.8 + 94.1 = $471 Mil.
Non Operating Income was 2.2 + 0.2 + 0.7 + 1.1 = $4 Mil.
Cash Flow from Operations was 335.7 + 109.7 + 134.8 + 77.9 = $658 Mil.
|Accounts Receivable was $455 Mil.
Revenue was 1201.9 + 1059.9 + 1024.1 + 1010.4 = $4,296 Mil.
Gross Profit was 521.7 + 421.9 + 404 + 389.7 = $1,737 Mil.
Total Current Assets was $1,357 Mil.
Total Assets was $4,473 Mil.
Property, Plant and Equipment(Net PPE) was $618 Mil.
Depreciation, Depletion and Amortization(DDA) was $106 Mil.
Selling, General & Admin. Expense(SGA) was $1,127 Mil.
Total Current Liabilities was $1,239 Mil.
Long-Term Debt was $1,051 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)|
|=||(465.2 / 4411.5)||/||(455.2 / 4296.3)|
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)|
|=||(1737.3 / 4296.3)||/||(1831.7 / 4411.5)|
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 - (1421.8 + 669.4) / 4635.9)||/||(1 - (1357.4 + 618.4) / 4472.6)|
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))|
|=||(105.9 / (105.9 + 618.4))||/||(108.7 / (108.7 + 669.4))|
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)|
|=||(1175 / 4411.5)||/||(1127.4 / 4296.3)|
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)|
|=||((1054 + 1422.7) / 4635.9)||/||((1051.4 + 1238.6) / 4472.6)|
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|
|=||(471 - 4.2||-||658.1)||/||4635.9|
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 -2.69 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