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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 -2.41.
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 * 0.9717||+||0.528 * 0.991||+||0.404 * 0.9844||+||0.892 * 1.093||+||0.115 * 1.0144|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9666||+||4.679 * -0.0602||-||0.327 * 1.0129|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $233 Mil.|
Revenue was 691.429 + 918.889 + 515.25 + 415.075 = $2,541 Mil.
Gross Profit was 199.551 + 270.736 + 143.023 + 118.295 = $732 Mil.
Total Current Assets was $736 Mil.
Total Assets was $1,038 Mil.
Property, Plant and Equipment(Net PPE) was $85 Mil.
Depreciation, Depletion and Amortization(DDA) was $21 Mil.
Selling, General & Admin. Expense(SGA) was $480 Mil.
Total Current Liabilities was $328 Mil.
Long-Term Debt was $389 Mil.
Net Income was 44.534 + 85.435 + 16.371 + 2.486 = $149 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 156.927 + 25.996 + -39.753 + 68.067 = $211 Mil.
|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.
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)|
|=||(233.405 / 2540.643)||/||(219.774 / 2324.506)|
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)|
|=||(663.369 / 2324.506)||/||(731.605 / 2540.643)|
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 - (736.225 + 84.643) / 1037.521)||/||(1 - (676.183 + 66.296) / 942.396)|
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))|
|=||(16.749 / (16.749 + 66.296))||/||(21.005 / (21.005 + 84.643))|
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)|
|=||(479.51 / 2540.643)||/||(453.858 / 2324.506)|
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)|
|=||((388.891 + 327.874) / 1037.521)||/||((393.067 + 249.679) / 942.396)|
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|
|=||(148.826 - 0||-||211.237)||/||1037.521|
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 -2.71 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