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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 0.37. The lowest was -3.25. And the median was -2.38.
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 * 1.009||+||0.528 * 1.0034||+||0.404 * 0.964||+||0.892 * 1.0514||+||0.115 * 1.0713|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9586||+||4.679 * -0.0414||-||0.327 * 0.9946|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $220 Mil.|
Revenue was 645.779 + 851.855 + 450.43 + 376.442 = $2,325 Mil.
Gross Profit was 184.288 + 248.26 + 124.801 + 106.02 = $663 Mil.
Total Current Assets was $676 Mil.
Total Assets was $942 Mil.
Property, Plant and Equipment(Net PPE) was $66 Mil.
Depreciation, Depletion and Amortization(DDA) was $17 Mil.
Selling, General & Admin. Expense(SGA) was $454 Mil.
Total Current Liabilities was $250 Mil.
Long-Term Debt was $393 Mil.
Net Income was 39.447 + 77.924 + 8.419 + -2.195 = $124 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 134.629 + 1.007 + -57.653 + 84.595 = $163 Mil.
|Accounts Receivable was $207 Mil.
Revenue was 615.536 + 848.24 + 406.344 + 340.789 = $2,211 Mil.
Gross Profit was 176.244 + 246.976 + 114.1 + 95.793 = $633 Mil.
Total Current Assets was $652 Mil.
Total Assets was $909 Mil.
Property, Plant and Equipment(Net PPE) was $57 Mil.
Depreciation, Depletion and Amortization(DDA) was $16 Mil.
Selling, General & Admin. Expense(SGA) was $450 Mil.
Total Current Liabilities was $232 Mil.
Long-Term Debt was $391 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)|
|=||(219.774 / 2324.506)||/||(207.165 / 2210.909)|
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)|
|=||(248.26 / 2210.909)||/||(184.288 / 2324.506)|
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 - (676.183 + 66.296) / 942.396)||/||(1 - (651.89 + 57.26) / 909.236)|
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))|
|=||(15.782 / (15.782 + 57.26))||/||(16.749 / (16.749 + 66.296))|
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)|
|=||(453.858 / 2324.506)||/||(450.325 / 2210.909)|
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)|
|=||((393.067 + 249.679) / 942.396)||/||((391.12 + 232.351) / 909.236)|
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|
|=||(123.595 - 0||-||162.578)||/||942.396|
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 -2.62 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