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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 PetSmart Inc was -1.66. The lowest was -4.00. And the median was -2.77.
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 PetSmart 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 * 1.4002||+||0.528 * 1.0108||+||0.404 * 1.5931||+||0.892 * 1.0017||+||0.115 * 0.9737|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.982||+||4.679 * -0.0746||-||0.327 * 0.9999|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $74 Mil.|
Revenue was 1739.117 + 1729.939 + 1729.132 + 1804.866 = $7,003 Mil.
Gross Profit was 512.163 + 515.117 + 530.838 + 565.998 = $2,124 Mil.
Total Current Assets was $1,390 Mil.
Total Assets was $2,709 Mil.
Property, Plant and Equipment(Net PPE) was $923 Mil.
Depreciation, Depletion and Amortization(DDA) was $235 Mil.
Selling, General & Admin. Expense(SGA) was $1,422 Mil.
Total Current Liabilities was $816 Mil.
Long-Term Debt was $449 Mil.
Net Income was 92.156 + 98.116 + 103.766 + 131.516 = $426 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 125.347 + 91.864 + 136.506 + 273.907 = $628 Mil.
|Accounts Receivable was $53 Mil.
Revenue was 1695.168 + 1705.997 + 1710.596 + 1879.166 = $6,991 Mil.
Gross Profit was 504.973 + 515.22 + 529.746 + 593.438 = $2,143 Mil.
Total Current Assets was $1,401 Mil.
Total Assets was $2,596 Mil.
Property, Plant and Equipment(Net PPE) was $957 Mil.
Depreciation, Depletion and Amortization(DDA) was $236 Mil.
Selling, General & Admin. Expense(SGA) was $1,445 Mil.
Total Current Liabilities was $759 Mil.
Long-Term Debt was $454 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)|
|=||(73.745 / 7003.054)||/||(52.576 / 6990.927)|
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)|
|=||(515.117 / 6990.927)||/||(512.163 / 7003.054)|
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 - (1389.921 + 922.943) / 2709.497)||/||(1 - (1400.786 + 956.653) / 2595.982)|
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))|
|=||(235.703 / (235.703 + 956.653))||/||(235.114 / (235.114 + 922.943))|
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)|
|=||(1421.811 / 7003.054)||/||(1445.388 / 6990.927)|
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)|
|=||((449.432 + 816.22) / 2709.497)||/||((453.62 + 759.08) / 2595.982)|
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|
|=||(425.554 - 0||-||627.624)||/||2709.497|
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.
PetSmart Inc has a M-score of -2.21 signals that the company is likely to 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
PetSmart Inc Annual Data
PetSmart Inc Quarterly Data