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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 -1.90. The lowest was -2.94. And the median was -2.49.
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 * 1.2224||+||0.528 * 1.034||+||0.404 * 0.8419||+||0.892 * 1.0087||+||0.115 * 1.0081|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0326||+||4.679 * -0.0363||-||0.327 * 1.0114|
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $31 Mil.|
Revenue was 502.424 + 517.584 + 525.773 + 538.821 = $2,085 Mil.
Gross Profit was 99.684 + 118.334 + 124.297 + 133.126 = $475 Mil.
Total Current Assets was $813 Mil.
Total Assets was $1,542 Mil.
Property, Plant and Equipment(Net PPE) was $604 Mil.
Depreciation, Depletion and Amortization(DDA) was $75 Mil.
Selling, General & Admin. Expense(SGA) was $484 Mil.
Total Current Liabilities was $657 Mil.
Long-Term Debt was $211 Mil.
Net Income was -26.668 + -1.964 + -0.273 + 1.608 = $-27 Mil.
Non Operating Income was 0.013 + 0.418 + 0.316 + 0.441 = $1 Mil.
Cash Flow from Operations was 15.819 + -3.933 + 4.104 + 11.454 = $27 Mil.
|Accounts Receivable was $25 Mil.
Revenue was 495.733 + 507.042 + 527.619 + 536.173 = $2,067 Mil.
Gross Profit was 104.016 + 122.812 + 138.708 + 121.84 = $487 Mil.
Total Current Assets was $826 Mil.
Total Assets was $1,605 Mil.
Property, Plant and Equipment(Net PPE) was $626 Mil.
Depreciation, Depletion and Amortization(DDA) was $78 Mil.
Selling, General & Admin. Expense(SGA) was $465 Mil.
Total Current Liabilities was $695 Mil.
Long-Term Debt was $200 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)|
|=||(31.013 / 2084.602)||/||(25.152 / 2066.567)|
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)|
|=||(118.334 / 2066.567)||/||(99.684 / 2084.602)|
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 - (812.6 + 604.38) / 1541.741)||/||(1 - (825.637 + 625.525) / 1605.481)|
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))|
|=||(78.439 / (78.439 + 625.525))||/||(75.099 / (75.099 + 604.38))|
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)|
|=||(484.183 / 2084.602)||/||(464.852 / 2066.567)|
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)|
|=||((211 + 657.428) / 1541.741)||/||((199.5 + 694.608) / 1605.481)|
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|
|=||(-27.297 - 1.188||-||27.444)||/||1541.741|
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 -2.49 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