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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.
Sears Holdings Corporation has a M-score of -2.68 suggests that the company is not a manipulator.
During the past 11 years, the highest Beneish M-Score of Sears Holdings Corporation was -2.45. The lowest was -3.30. And the median was -2.68.
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 Sears Holdings Corporation 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 * 0.9591||+||0.528 * 1.0904||+||0.404 * 1.0291||+||0.892 * 0.908||+||0.115 * 1.0092|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9695||+||4.679 * -0.0232||-||0.327 * 1.1268|
|This Year (Jan14) TTM:||Last Year (Jan13) TTM:|
|Accounts Receivable was $553 Mil.|
Revenue was 10593 + 8272 + 8871 + 8452 = $36,188 Mil.
Gross Profit was 2482 + 1931 + 2186 + 2156 = $8,755 Mil.
Total Current Assets was $8,959 Mil.
Total Assets was $18,261 Mil.
Property, Plant and Equipment(Net PPE) was $5,394 Mil.
Depreciation, Depletion and Amortization(DDA) was $732 Mil.
Selling, General & Admin. Expense(SGA) was $9,384 Mil.
Total Current Liabilities was $8,185 Mil.
Long-Term Debt was $2,834 Mil.
Net Income was -358 + -534 + -194 + -279 = $-1,365 Mil.
Non Operating Income was 168 + 1 + -1 + 0 = $168 Mil.
Cash Flow from Operations was 563 + -957 + -2 + -713 = $-1,109 Mil.
|Accounts Receivable was $635 Mil.
Revenue was 12260 + 8857 + 9467 + 9270 = $39,854 Mil.
Gross Profit was 3163 + 2253 + 2531 + 2567 = $10,514 Mil.
Total Current Assets was $9,265 Mil.
Total Assets was $19,340 Mil.
Property, Plant and Equipment(Net PPE) was $6,053 Mil.
Depreciation, Depletion and Amortization(DDA) was $830 Mil.
Selling, General & Admin. Expense(SGA) was $10,660 Mil.
Total Current Liabilities was $8,414 Mil.
Long-Term Debt was $1,943 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)|
|=||(553 / 36188)||/||(635 / 39854)|
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)|
|=||(1931 / 39854)||/||(2482 / 36188)|
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 - (8959 + 5394) / 18261)||/||(1 - (9265 + 6053) / 19340)|
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))|
|=||(830 / (830 + 6053))||/||(732 / (732 + 5394))|
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)|
|=||(9384 / 36188)||/||(10660 / 39854)|
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)|
|=||((2834 + 8185) / 18261)||/||((1943 + 8414) / 19340)|
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|
|=||(-1365 - 168||-||-1109)||/||18261|
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.
Sears Holdings Corporation has a M-score of -2.68 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
Sears Holdings Corporation Annual Data
Sears Holdings Corporation Quarterly Data