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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 Corp has a M-score of -2.77 suggests that the company is not a manipulator.
During the past 11 years, the highest Beneish M-Score of Sears Holdings Corp was 8.32. The lowest was -4.27. 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 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 * 1.0131||+||0.528 * 1.0938||+||0.404 * 0.9123||+||0.892 * 0.9124||+||0.115 * 1.0293|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9723||+||4.679 * -0.0412||-||0.327 * 1.153|
|This Year (Apr14) TTM:||Last Year (Apr13) TTM:|
|Accounts Receivable was $562 Mil.|
Revenue was 7879 + 10593 + 8272 + 8871 = $35,615 Mil.
Gross Profit was 1828 + 2482 + 1931 + 2186 = $8,427 Mil.
Total Current Assets was $8,527 Mil.
Total Assets was $16,930 Mil.
Property, Plant and Equipment(Net PPE) was $5,190 Mil.
Depreciation, Depletion and Amortization(DDA) was $696 Mil.
Selling, General & Admin. Expense(SGA) was $9,255 Mil.
Total Current Liabilities was $8,012 Mil.
Long-Term Debt was $2,821 Mil.
Net Income was -402 + -358 + -534 + -194 = $-1,488 Mil.
Non Operating Income was -3 + 168 + 1 + -1 = $165 Mil.
Cash Flow from Operations was -560 + 563 + -957 + -2 = $-956 Mil.
|Accounts Receivable was $608 Mil.
Revenue was 8452 + 12260 + 8857 + 9467 = $39,036 Mil.
Gross Profit was 2156 + 3163 + 2253 + 2531 = $10,103 Mil.
Total Current Assets was $9,451 Mil.
Total Assets was $19,396 Mil.
Property, Plant and Equipment(Net PPE) was $5,910 Mil.
Depreciation, Depletion and Amortization(DDA) was $819 Mil.
Selling, General & Admin. Expense(SGA) was $10,433 Mil.
Total Current Liabilities was $8,835 Mil.
Long-Term Debt was $1,929 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)|
|=||(562 / 35615)||/||(608 / 39036)|
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)|
|=||(2482 / 39036)||/||(1828 / 35615)|
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 - (8527 + 5190) / 16930)||/||(1 - (9451 + 5910) / 19396)|
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))|
|=||(819 / (819 + 5910))||/||(696 / (696 + 5190))|
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)|
|=||(9255 / 35615)||/||(10433 / 39036)|
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)|
|=||((2821 + 8012) / 16930)||/||((1929 + 8835) / 19396)|
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|
|=||(-1488 - 165||-||-956)||/||16930|
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 Corp has a M-score of -2.77 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 Corp Annual Data
Sears Holdings Corp Quarterly Data