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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 Pep Boys - Manny Moe & Jack was -1.57. The lowest was -3.05. 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 Pep Boys - Manny Moe & Jack 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 * 1.0031||+||0.528 * 1.0027||+||0.404 * 0.8056||+||0.892 * 1.0007||+||0.115 * 1.0115|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0001||+||4.679 * -0.0714||-||0.327 * 0.9746|
|This Year (Oct15) TTM:||Last Year (Oct14) TTM:|
|Accounts Receivable was $32 Mil.|
Revenue was 508.136 + 526.546 + 542.261 + 502.424 = $2,079 Mil.
Gross Profit was 117.797 + 127.572 + 133.767 + 99.684 = $479 Mil.
Total Current Assets was $797 Mil.
Total Assets was $1,492 Mil.
Property, Plant and Equipment(Net PPE) was $579 Mil.
Depreciation, Depletion and Amortization(DDA) was $69 Mil.
Selling, General & Admin. Expense(SGA) was $476 Mil.
Total Current Liabilities was $614 Mil.
Long-Term Debt was $193 Mil.
Net Income was 1.266 + 4.81 + 11.893 + -26.668 = $-9 Mil.
Non Operating Income was 0.345 + 0.334 + 0.372 + 0.013 = $1 Mil.
Cash Flow from Operations was 13.671 + 33.446 + 33.829 + 15.819 = $97 Mil.
|Accounts Receivable was $32 Mil.
Revenue was 517.584 + 525.773 + 538.821 + 495.733 = $2,078 Mil.
Gross Profit was 118.334 + 124.297 + 133.126 + 104.016 = $480 Mil.
Total Current Assets was $807 Mil.
Total Assets was $1,572 Mil.
Property, Plant and Equipment(Net PPE) was $614 Mil.
Depreciation, Depletion and Amortization(DDA) was $74 Mil.
Selling, General & Admin. Expense(SGA) was $476 Mil.
Total Current Liabilities was $642 Mil.
Long-Term Debt was $230 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)|
|=||(31.743 / 2079.367)||/||(31.622 / 2077.911)|
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)|
|=||(127.572 / 2077.911)||/||(117.797 / 2079.367)|
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 - (797.481 + 579.3) / 1492.355)||/||(1 - (806.91 + 614.326) / 1572.401)|
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))|
|=||(74.016 / (74.016 + 614.326))||/||(68.907 / (68.907 + 579.3))|
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)|
|=||(476.328 / 2079.367)||/||(475.962 / 2077.911)|
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)|
|=||((192.5 + 613.818) / 1492.355)||/||((229.5 + 642.251) / 1572.401)|
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|
|=||(-8.699 - 1.064||-||96.765)||/||1492.355|
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.
Pep Boys - Manny Moe & Jack has a M-score of -2.88 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
Pep Boys - Manny Moe & Jack Annual Data
Pep Boys - Manny Moe & Jack Quarterly Data