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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 * 0.9938||+||0.528 * 1.0016||+||0.404 * 0.8961||+||0.892 * 1.0488||+||0.115 * 1.1077|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9984||+||4.679 * -0.0918||-||0.327 * 1.1114|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $76 Mil.|
Revenue was 2598.82 + 2729.566 + 2680.593 + 2741.04 = $10,750 Mil.
Gross Profit was 716.635 + 785.549 + 772.409 + 748.939 = $3,024 Mil.
Total Current Assets was $2,302 Mil.
Total Assets was $4,669 Mil.
Property, Plant and Equipment(Net PPE) was $2,202 Mil.
Depreciation, Depletion and Amortization(DDA) was $227 Mil.
Selling, General & Admin. Expense(SGA) was $1,586 Mil.
Total Current Liabilities was $1,767 Mil.
Long-Term Debt was $398 Mil.
Net Income was 192.72 + 239.561 + 243.913 + 217.953 = $894 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 240.191 + 237.214 + 504.577 + 340.782 = $1,323 Mil.
|Accounts Receivable was $73 Mil.
Revenue was 2398.122 + 2551.277 + 2539.914 + 2760.646 = $10,250 Mil.
Gross Profit was 651.887 + 727.5 + 741.103 + 766.985 = $2,887 Mil.
Total Current Assets was $2,050 Mil.
Total Assets was $3,947 Mil.
Property, Plant and Equipment(Net PPE) was $1,741 Mil.
Depreciation, Depletion and Amortization(DDA) was $201 Mil.
Selling, General & Admin. Expense(SGA) was $1,515 Mil.
Total Current Liabilities was $1,497 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)|
|=||(75.895 / 10750.019)||/||(72.819 / 10249.959)|
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)|
|=||(785.549 / 10249.959)||/||(716.635 / 10750.019)|
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 - (2302.493 + 2201.62) / 4669.242)||/||(1 - (2050.089 + 1740.879) / 3946.723)|
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))|
|=||(201.078 / (201.078 + 1740.879))||/||(227.021 / (227.021 + 2201.62))|
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)|
|=||(1586.374 / 10750.019)||/||(1515.024 / 10249.959)|
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)|
|=||((398.339 + 1766.924) / 4669.242)||/||((150 + 1496.697) / 3946.723)|
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|
|=||(894.147 - 0||-||1322.764)||/||4669.242|
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 -2.94 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