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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 Pier 1 Imports Inc was 6.80. The lowest was -4.03. And the median was -2.78.
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 Pier 1 Imports 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 * 1.2107||+||0.528 * 1.0662||+||0.404 * 0.8684||+||0.892 * 1.0168||+||0.115 * 1.0133|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0165||+||4.679 * 0.0337||-||0.327 * 1.6493|
|This Year (Nov14) TTM:||Last Year (Nov13) TTM:|
|Accounts Receivable was $45 Mil.|
Revenue was 484.501 + 418.622 + 419.059 + 515.786 = $1,838 Mil.
Gross Profit was 204.913 + 162.637 + 167.714 + 214.436 = $750 Mil.
Total Current Assets was $667 Mil.
Total Assets was $921 Mil.
Property, Plant and Equipment(Net PPE) was $209 Mil.
Depreciation, Depletion and Amortization(DDA) was $52 Mil.
Selling, General & Admin. Expense(SGA) was $561 Mil.
Total Current Liabilities was $322 Mil.
Long-Term Debt was $205 Mil.
Net Income was 17.86 + 9.158 + 15.055 + 42.592 = $85 Mil.
Non Operating Income was 0 + 0 + 0 + 1.721 = $2 Mil.
Cash Flow from Operations was 24.36 + -97.702 + 27.133 + 98.07 = $52 Mil.
|Accounts Receivable was $37 Mil.
Revenue was 465.462 + 395.641 + 394.853 + 551.625 = $1,808 Mil.
Gross Profit was 202.23 + 161.299 + 167.597 + 254.978 = $786 Mil.
Total Current Assets was $645 Mil.
Total Assets was $872 Mil.
Property, Plant and Equipment(Net PPE) was $177 Mil.
Depreciation, Depletion and Amortization(DDA) was $44 Mil.
Selling, General & Admin. Expense(SGA) was $543 Mil.
Total Current Liabilities was $293 Mil.
Long-Term Debt was $10 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)|
|=||(45.002 / 1837.968)||/||(36.557 / 1807.581)|
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)|
|=||(162.637 / 1807.581)||/||(204.913 / 1837.968)|
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 - (666.761 + 208.722) / 921.383)||/||(1 - (645.456 + 176.816) / 872.315)|
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))|
|=||(44.492 / (44.492 + 176.816))||/||(51.663 / (51.663 + 208.722))|
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)|
|=||(560.997 / 1837.968)||/||(542.785 / 1807.581)|
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)|
|=||((205.173 + 322.005) / 921.383)||/||((9.5 + 293.108) / 872.315)|
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|
|=||(84.665 - 1.721||-||51.861)||/||921.383|
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.
Pier 1 Imports Inc has a M-score of -2.35 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
Pier 1 Imports Inc Annual Data
Pier 1 Imports Inc Quarterly Data