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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 7 years, the highest Beneish M-Score of Primo Water Corp was -1.85. The lowest was -10.60. And the median was -3.78.
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 Primo Water 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 * 0.888||+||0.528 * 1.0181||+||0.404 * 0.8925||+||0.892 * 1.2989||+||0.115 * 1.0127|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0052||+||4.679 * -0.2546||-||0.327 * 0.9258|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $10.3 Mil.|
Revenue was 33.863 + 32.399 + 29.213 + 29.566 = $125.0 Mil.
Gross Profit was 9.504 + 8.194 + 7.656 + 7.324 = $32.7 Mil.
Total Current Assets was $21.3 Mil.
Total Assets was $66.7 Mil.
Property, Plant and Equipment(Net PPE) was $32.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.0 Mil.
Selling, General & Admin. Expense(SGA) was $20.6 Mil.
Total Current Liabilities was $17.6 Mil.
Long-Term Debt was $21.3 Mil.
Net Income was 1.324 + 0.726 + -0.237 + -3.526 = $-1.7 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 1.458 + 6.634 + 1.883 + 5.29 = $15.3 Mil.
|Accounts Receivable was $8.9 Mil.
Revenue was 26.374 + 26.853 + 23.528 + 19.513 = $96.3 Mil.
Gross Profit was 7.597 + 6.762 + 6.186 + 5.07 = $25.6 Mil.
Total Current Assets was $19.3 Mil.
Total Assets was $69.0 Mil.
Property, Plant and Equipment(Net PPE) was $34.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.8 Mil.
Selling, General & Admin. Expense(SGA) was $15.8 Mil.
Total Current Liabilities was $15.8 Mil.
Long-Term Debt was $27.7 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)|
|=||(10.288 / 125.041)||/||(8.92 / 96.268)|
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)|
|=||(8.194 / 96.268)||/||(9.504 / 125.041)|
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 - (21.263 + 32.6) / 66.678)||/||(1 - (19.326 + 34.836) / 69.026)|
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))|
|=||(10.848 / (10.848 + 34.836))||/||(9.985 / (9.985 + 32.6))|
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)|
|=||(20.612 / 125.041)||/||(15.787 / 96.268)|
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)|
|=||((21.318 + 17.561) / 66.678)||/||((27.718 + 15.757) / 69.026)|
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|
|=||(-1.713 - 0||-||15.265)||/||66.678|
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.
Primo Water Corp has a M-score of -3.52 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
Primo Water Corp Annual Data
Primo Water Corp Quarterly Data