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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.
Morningstar Inc has a M-score of -2.61 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Morningstar Inc was -2.31. The lowest was -2.83. 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 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 * 1.0239||+||0.528 * 1.0538||+||0.404 * 1.0411||+||0.892 * 1.0663||+||0.115 * 1.0729|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9082||+||4.679 * -0.0559||-||0.327 * 1.0576|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $131.5 Mil.|
Revenue was 181.165 + 180.5 + 173.482 + 175.428 = $710.6 Mil.
Gross Profit was 105.451 + 107.562 + 101.06 + 125.155 = $439.2 Mil.
Total Current Assets was $424.9 Mil.
Total Assets was $1,007.4 Mil.
Property, Plant and Equipment(Net PPE) was $107.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $46.7 Mil.
Selling, General & Admin. Expense(SGA) was $209.7 Mil.
Total Current Liabilities was $247.9 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 26.376 + 31.327 + 31.463 + 31.121 = $120.3 Mil.
Non Operating Income was 0.28 + 1.852 + 0.141 + 2.447 = $4.7 Mil.
Cash Flow from Operations was 11.884 + 54.445 + 47.078 + 58.462 = $171.9 Mil.
|Accounts Receivable was $120.4 Mil.
Revenue was 168.856 + 170.609 + 160.952 + 165.968 = $666.4 Mil.
Gross Profit was 107.206 + 109.969 + 100.384 + 116.516 = $434.1 Mil.
Total Current Assets was $480.2 Mil.
Total Assets was $1,045.5 Mil.
Property, Plant and Equipment(Net PPE) was $91.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $44.3 Mil.
Selling, General & Admin. Expense(SGA) was $216.5 Mil.
Total Current Liabilities was $243.2 Mil.
Long-Term Debt was $0.0 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)|
|=||(131.464 / 710.575)||/||(120.416 / 666.385)|
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)|
|=||(107.562 / 666.385)||/||(105.451 / 710.575)|
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 - (424.942 + 107.438) / 1007.417)||/||(1 - (480.178 + 91.815) / 1045.549)|
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))|
|=||(44.26 / (44.26 + 91.815))||/||(46.741 / (46.741 + 107.438))|
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)|
|=||(209.707 / 710.575)||/||(216.544 / 666.385)|
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 + 247.857) / 1007.417)||/||((0 + 243.232) / 1045.549)|
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|
|=||(120.287 - 4.72||-||171.869)||/||1007.417|
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 -2.61 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
Morningstar Inc Annual Data
Morningstar Inc Quarterly Data