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Morningstar Inc (NAS:MORN)
Beneish M-Score
-2.57 (As of Today)

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.

Morningstar Inc has a M-score of -2.58 suggests that the company is not a manipulator.

MORN' s 10-Year Beneish M-Score Range
Min: -2.77   Max: -2.2
Current: -2.57

-2.77
-2.2

During the past 13 years, the highest Beneish M-Score of Morningstar Inc was -2.20. The lowest was -2.77. And the median was -2.56.


Definition

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 Morningstar 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 * 1.0168+0.528 * 1.1703+0.404 * 1.1255+0.892 * 1.081+0.115 * 0.9919
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9423+4.679 * -0.0571-0.327 * 1.1995
=-2.58

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $125.0 Mil.
Revenue was 193.106 + 189.385 + 181.165 + 180.5 = $744.2 Mil.
Gross Profit was 112.964 + 107.998 + 105.451 + 107.562 = $434.0 Mil.
Total Current Assets was $388.3 Mil.
Total Assets was $1,020.2 Mil.
Property, Plant and Equipment(Net PPE) was $112.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $52.2 Mil.
Selling, General & Admin. Expense(SGA) was $219.9 Mil.
Total Current Liabilities was $290.9 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 30.18 + -9.769 + 26.376 + 31.327 = $78.1 Mil.
Non Operating Income was -0.813 + 5.264 + 0.28 + 1.852 = $6.6 Mil.
Cash Flow from Operations was 8.6 + 54.804 + 11.884 + 54.445 = $129.7 Mil.
Accounts Receivable was $113.7 Mil.
Revenue was 173.482 + 175.428 + 168.856 + 170.609 = $688.4 Mil.
Gross Profit was 101.06 + 125.155 + 120.846 + 122.741 = $469.8 Mil.
Total Current Assets was $489.4 Mil.
Total Assets was $1,074.2 Mil.
Property, Plant and Equipment(Net PPE) was $99.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $45.3 Mil.
Selling, General & Admin. Expense(SGA) was $215.9 Mil.
Total Current Liabilities was $255.3 Mil.
Long-Term Debt was $0.0 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(124.966 / 744.156) / (113.688 / 688.375)
=0.16792984 / 0.16515417
=1.0168

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(107.998 / 688.375) / (112.964 / 744.156)
=0.68247975 / 0.58317745
=1.1703

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (388.344 + 112.584) / 1020.175) / (1 - (489.4 + 99.007) / 1074.15)
=0.50897836 / 0.45221152
=1.1255

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=744.156 / 688.375
=1.081

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))
=(45.338 / (45.338 + 99.007)) / (52.171 / (52.171 + 112.584))
=0.3140947 / 0.31665807
=0.9919

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)
=(219.894 / 744.156) / (215.872 / 688.375)
=0.29549449 / 0.31359651
=0.9423

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)
=((0 + 290.887) / 1020.175) / ((0 + 255.339) / 1074.15)
=0.28513441 / 0.23771261
=1.1995

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(78.114 - 6.583 - 129.733) / 1020.175
=-0.0571

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.

Morningstar Inc has a M-score of -2.58 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Morningstar Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.17891.11670.98810.96480.89310.96451.16170.89880.9680.9409
GMI 0.98930.97080.98950.98040.99651.01311.021.00791.01181.1505
AQI 0.85320.87171.7690.93141.01911.09661.05270.88191.10541.0015
SGI 1.28791.26411.38771.38051.15480.95331.15941.13691.04261.0607
DEPI 0.91280.99020.66450.92191.71820.88020.89341.00911.13921.118
SGAI 0.75710.84340.86661.00740.97860.97231.04981.00320.97240.9113
LVGI 0.91660.70180.95650.89720.86550.77481.03410.99251.06971.101
TATA -0.1195-0.0645-0.11-0.0578-0.0727-0.0148-0.0381-0.0563-0.0343-0.0658
M-score -2.62-2.38-2.36-2.46-2.64-2.51-2.37-2.76-2.59-2.71

Morningstar Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.98171.0480.9680.93210.90290.89030.94091.04711.13831.0168
GMI 1.03461.02921.01180.98620.97621.02161.08011.14911.22421.1703
AQI 0.98381.05451.10541.05921.05260.97841.00151.04111.10681.1255
SGI 1.06891.03571.04261.04061.04731.06521.06071.06631.0721.081
DEPI 1.13481.14051.13921.13211.11641.12951.1181.07291.03870.9919
SGAI 0.96210.94110.97240.97160.98550.96710.91130.90820.89710.9423
LVGI 1.111.11531.06971.05431.02830.96981.1011.05761.25731.1995
TATA -0.054-0.0451-0.0343-0.0456-0.0544-0.0574-0.0658-0.0559-0.0917-0.0571
M-score -2.69-2.59-2.59-2.70-2.77-2.76-2.75-2.54-2.62-2.58
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