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Morningstar Inc (NAS:MORN)
Beneish M-Score
-2.69 (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 -2.69 suggests that the company is not a manipulator.

MORN' s 10-Year Beneish M-Score Range
Min: -2.75   Max: -2.2
Current: -2.69

-2.75
-2.2

During the past 13 years, the highest Beneish M-Score of Morningstar Inc was -2.20. The lowest was -2.75. And the median was -2.55.


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 * 1.1383+0.528 * 1.0885+0.404 * 1.1068+0.892 * 1.072+0.115 * 1.0387
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8971+4.679 * -0.0917-0.327 * 1.2573
=-2.69

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $135.0 Mil.
Revenue was 189.385 + 181.165 + 180.5 + 173.482 = $724.5 Mil.
Gross Profit was 107.998 + 105.451 + 107.562 + 101.06 = $422.1 Mil.
Total Current Assets was $402.6 Mil.
Total Assets was $1,051.2 Mil.
Property, Plant and Equipment(Net PPE) was $109.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $48.9 Mil.
Selling, General & Admin. Expense(SGA) was $211.9 Mil.
Total Current Liabilities was $322.2 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -9.769 + 26.376 + 31.327 + 31.463 = $79.4 Mil.
Non Operating Income was 5.264 + 0.28 + 1.852 + 0.141 = $7.5 Mil.
Cash Flow from Operations was 54.804 + 11.884 + 54.445 + 47.078 = $168.2 Mil.
Accounts Receivable was $110.6 Mil.
Revenue was 175.428 + 168.856 + 170.609 + 160.952 = $675.8 Mil.
Gross Profit was 111.001 + 107.206 + 109.969 + 100.384 = $428.6 Mil.
Total Current Assets was $462.4 Mil.
Total Assets was $1,039.1 Mil.
Property, Plant and Equipment(Net PPE) was $95.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $44.9 Mil.
Selling, General & Admin. Expense(SGA) was $220.4 Mil.
Total Current Liabilities was $253.3 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)
=(135.017 / 724.532) / (110.646 / 675.845)
=0.18635064 / 0.16371505
=1.1383

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)
=(105.451 / 675.845) / (107.998 / 724.532)
=0.63410989 / 0.58254294
=1.0885

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 - (402.585 + 109.9) / 1051.223) / (1 - (462.385 + 95.55) / 1039.057)
=0.51248688 / 0.46303716
=1.1068

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
=724.532 / 675.845
=1.072

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))
=(44.903 / (44.903 + 95.55)) / (48.87 / (48.87 + 109.9))
=0.31970125 / 0.30780374
=1.0387

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)
=(211.939 / 724.532) / (220.38 / 675.845)
=0.29251848 / 0.32608068
=0.8971

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 + 322.188) / 1051.223) / ((0 + 253.296) / 1039.057)
=0.30648873 / 0.24377488
=1.2573

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
=(79.397 - 7.537 - 168.211) / 1051.223
=-0.0917

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 -2.69 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 0.98930.97080.98950.98040.99651.01311.021.00791.13831.0226
AQI 0.85320.87171.7690.93141.01911.09591.05340.88191.10541.0015
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 0.75710.84340.86661.00740.97860.97641.04541.00320.97240.9113
LVGI 0.91660.70180.95650.89720.86550.77751.03050.99251.06971.101
TATA -0.1195-0.0645-0.11-0.0578-0.0727-0.0207-0.0381-0.0563-0.0343-0.0658
M-score -2.62-2.38-2.36-2.46-2.64-2.54-2.37-2.76-2.52-2.78

Morningstar Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.9520.98171.0480.9680.93210.90290.89030.94091.04711.1383
GMI 1.02451.03461.05941.07111.07541.09791.08621.08681.08891.0885
AQI 0.91320.98381.05451.10541.05921.05260.97841.00151.04111.1068
SGI 1.10641.06891.03571.04261.04061.04731.06521.06071.06631.072
DEPI 1.0761.13481.14051.13921.13211.11641.12951.1181.07291.0387
SGAI 0.95740.96210.94110.97240.97160.98550.96710.91130.90820.8971
LVGI 1.03611.111.11531.06971.05431.02830.96981.1011.05761.2573
TATA -0.0507-0.054-0.0451-0.0343-0.0456-0.0544-0.0574-0.0658-0.0559-0.0917
M-score -2.68-2.69-2.57-2.55-2.65-2.70-2.72-2.75-2.57-2.69
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