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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.
PetSmart Inc. has a M-score of -2.82 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of PetSmart Inc. was -1.83. The lowest was -4.00. And the median was -2.68.
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 * 0.9837||+||0.528 * 0.9974||+||0.404 * 1.0774||+||0.892 * 1.0234||+||0.115 * 0.9831|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9852||+||4.679 * -0.0776||-||0.327 * 1.0278|
|This Year (Jan14) TTM:||Last Year (Jan13) TTM:|
|Accounts Receivable was $73 Mil.|
Revenue was 1804.866 + 1695.168 + 1705.997 + 1710.596 = $6,917 Mil.
Gross Profit was 565.998 + 504.973 + 515.22 + 529.746 = $2,116 Mil.
Total Current Assets was $1,318 Mil.
Total Assets was $2,522 Mil.
Property, Plant and Equipment(Net PPE) was $953 Mil.
Depreciation, Depletion and Amortization(DDA) was $235 Mil.
Selling, General & Admin. Expense(SGA) was $1,423 Mil.
Total Current Liabilities was $794 Mil.
Long-Term Debt was $452 Mil.
Net Income was 131.516 + 92.221 + 93.368 + 102.415 = $420 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 273.907 + 107.238 + 86.789 + 147.246 = $615 Mil.
|Accounts Receivable was $72 Mil.
Revenue was 1879.166 + 1629.511 + 1619.667 + 1629.893 = $6,758 Mil.
Gross Profit was 593.438 + 482.512 + 488.815 + 497.374 = $2,062 Mil.
Total Current Assets was $1,317 Mil.
Total Assets was $2,537 Mil.
Property, Plant and Equipment(Net PPE) was $986 Mil.
Depreciation, Depletion and Amortization(DDA) was $238 Mil.
Selling, General & Admin. Expense(SGA) was $1,411 Mil.
Total Current Liabilities was $755 Mil.
Long-Term Debt was $465 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)|
|=||(72.685 / 6916.627)||/||(72.198 / 6758.237)|
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)|
|=||(504.973 / 6758.237)||/||(565.998 / 6916.627)|
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 - (1318.243 + 952.955) / 2521.968)||/||(1 - (1317.136 + 985.707) / 2536.981)|
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))|
|=||(238.406 / (238.406 + 985.707))||/||(235.431 / (235.431 + 952.955))|
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)|
|=||(1422.619 / 6916.627)||/||(1410.922 / 6758.237)|
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)|
|=||((451.597 + 794.345) / 2521.968)||/||((464.578 + 754.892) / 2536.981)|
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|
|=||(419.52 - 0||-||615.18)||/||2521.968|
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 -2.82 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
PetSmart Inc. Annual Data
PetSmart Inc. Quarterly Data