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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 Pool Corp was 0.35. The lowest was -3.25. And the median was -2.40.
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 Pool Corp 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 * 0.9537||+||0.528 * 0.9892||+||0.404 * 0.9735||+||0.892 * 1.0717||+||0.115 * 1.0043|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9948||+||4.679 * 0.0087||-||0.327 * 0.9977|
|This Year (Mar17) TTM:||Last Year (Mar16) TTM:|
|Accounts Receivable was $290 Mil.|
Revenue was 546.441 + 445.235 + 691.429 + 918.889 = $2,602 Mil.
Gross Profit was 153.621 + 127.777 + 199.551 + 270.736 = $752 Mil.
Total Current Assets was $967 Mil.
Total Assets was $1,281 Mil.
Property, Plant and Equipment(Net PPE) was $97 Mil.
Depreciation, Depletion and Amortization(DDA) was $23 Mil.
Selling, General & Admin. Expense(SGA) was $494 Mil.
Total Current Liabilities was $525 Mil.
Long-Term Debt was $480 Mil.
Net Income was 22.281 + 2.615 + 44.534 + 85.435 = $155 Mil.
Non Operating Income was 0 + -28.962 + 0 + 0 = $-29 Mil.
Cash Flow from Operations was -32.424 + 22.208 + 156.927 + 25.996 = $173 Mil.
|Accounts Receivable was $284 Mil.
Revenue was 515.25 + 415.075 + 645.779 + 851.855 = $2,428 Mil.
Gross Profit was 143.023 + 118.295 + 184.288 + 248.26 = $694 Mil.
Total Current Assets was $908 Mil.
Total Assets was $1,193 Mil.
Property, Plant and Equipment(Net PPE) was $78 Mil.
Depreciation, Depletion and Amortization(DDA) was $18 Mil.
Selling, General & Admin. Expense(SGA) was $464 Mil.
Total Current Liabilities was $494 Mil.
Long-Term Debt was $444 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)|
|=||(290.019 / 2601.994)||/||(283.758 / 2427.959)|
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)|
|=||(693.866 / 2427.959)||/||(751.685 / 2601.994)|
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 - (967.052 + 97.14) / 1280.869)||/||(1 - (907.674 + 78.21) / 1193.241)|
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))|
|=||(18.474 / (18.474 + 78.21))||/||(22.824 / (22.824 + 97.14))|
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)|
|=||(494.358 / 2601.994)||/||(463.713 / 2427.959)|
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)|
|=||((480.442 + 524.685) / 1280.869)||/||((444.461 + 494.071) / 1193.241)|
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|
|=||(154.865 - -28.962||-||172.707)||/||1280.869|
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.
Pool Corp has a M-score of -2.43 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
Pool Corp Annual Data
Pool Corp Quarterly Data