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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 Ross Stores Inc was -2.07. The lowest was -3.33. And the median was -2.62.
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 Ross Stores 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 * 0.9489||+||0.528 * 0.9911||+||0.404 * 0.866||+||0.892 * 1.0937||+||0.115 * 1.0038|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9886||+||4.679 * -0.0496||-||0.327 * 1.064|
|This Year (Jul15) TTM:||Last Year (Jul14) TTM:|
|Accounts Receivable was $88 Mil.|
Revenue was 2968.27 + 2938.148 + 3032.698 + 2598.82 = $11,538 Mil.
Gross Profit was 848.79 + 870.693 + 829.129 + 716.635 = $3,265 Mil.
Total Current Assets was $2,370 Mil.
Total Assets was $4,824 Mil.
Property, Plant and Equipment(Net PPE) was $2,289 Mil.
Depreciation, Depletion and Amortization(DDA) was $251 Mil.
Selling, General & Admin. Expense(SGA) was $1,685 Mil.
Total Current Liabilities was $1,676 Mil.
Long-Term Debt was $396 Mil.
Net Income was 258.639 + 282.205 + 248.53 + 192.72 = $982 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 176.383 + 413.988 + 390.883 + 240.191 = $1,221 Mil.
|Accounts Receivable was $85 Mil.
Revenue was 2729.566 + 2680.593 + 2741.04 + 2398.122 = $10,549 Mil.
Gross Profit was 785.549 + 772.409 + 748.939 + 651.887 = $2,959 Mil.
Total Current Assets was $2,024 Mil.
Total Assets was $4,168 Mil.
Property, Plant and Equipment(Net PPE) was $1,979 Mil.
Depreciation, Depletion and Amortization(DDA) was $218 Mil.
Selling, General & Admin. Expense(SGA) was $1,558 Mil.
Total Current Liabilities was $1,532 Mil.
Long-Term Debt was $150 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)|
|=||(88.443 / 11537.936)||/||(85.218 / 10549.321)|
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)|
|=||(870.693 / 10549.321)||/||(848.79 / 11537.936)|
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 - (2370.033 + 2289.478) / 4824.304)||/||(1 - (2023.865 + 1979.288) / 4167.54)|
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))|
|=||(217.928 / (217.928 + 1979.288))||/||(251.018 / (251.018 + 2289.478))|
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)|
|=||(1684.868 / 11537.936)||/||(1558.232 / 10549.321)|
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)|
|=||((395.793 + 1675.657) / 4824.304)||/||((149.708 + 1532.121) / 4167.54)|
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|
|=||(982.094 - 0||-||1221.445)||/||4824.304|
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.
Ross Stores Inc has a M-score of -2.75 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
Ross Stores Inc Annual Data
Ross Stores Inc Quarterly Data