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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 Sherwin-Williams Co was -2.15. The lowest was -3.23. And the median was -2.67.
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 Sherwin-Williams Co 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 * 0.9436||+||0.528 * 0.98||+||0.404 * 1.1387||+||0.892 * 1.1072||+||0.115 * 0.9501|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0129||+||4.679 * -0.0566||-||0.327 * 1.0829|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $1,409 Mil.|
Revenue was 3150.57 + 3042.995 + 2366.556 + 2457.058 = $11,017 Mil.
Gross Profit was 1470.955 + 1409.653 + 1065.901 + 1124.178 = $5,071 Mil.
Total Current Assets was $3,080 Mil.
Total Assets was $6,317 Mil.
Property, Plant and Equipment(Net PPE) was $1,013 Mil.
Depreciation, Depletion and Amortization(DDA) was $197 Mil.
Selling, General & Admin. Expense(SGA) was $3,800 Mil.
Total Current Liabilities was $2,868 Mil.
Long-Term Debt was $1,123 Mil.
Net Income was 326.24 + 291.447 + 115.457 + 116.123 = $849 Mil.
Non Operating Income was 14.593 + 5.147 + -0.503 + 0.552 = $20 Mil.
Cash Flow from Operations was 549.73 + 414.699 + -83.119 + 305.855 = $1,187 Mil.
|Accounts Receivable was $1,349 Mil.
Revenue was 2847.417 + 2713.889 + 2167.168 + 2221.87 = $9,950 Mil.
Gross Profit was 1295.958 + 1233.579 + 962.851 + 995.508 = $4,488 Mil.
Total Current Assets was $3,771 Mil.
Total Assets was $6,922 Mil.
Property, Plant and Equipment(Net PPE) was $1,011 Mil.
Depreciation, Depletion and Amortization(DDA) was $185 Mil.
Selling, General & Admin. Expense(SGA) was $3,388 Mil.
Total Current Liabilities was $2,406 Mil.
Long-Term Debt was $1,632 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)|
|=||(1408.967 / 11017.179)||/||(1348.607 / 9950.344)|
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)|
|=||(1409.653 / 9950.344)||/||(1470.955 / 11017.179)|
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 - (3079.735 + 1013.285) / 6317.005)||/||(1 - (3770.715 + 1010.928) / 6921.588)|
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))|
|=||(184.933 / (184.933 + 1010.928))||/||(197 / (197 + 1013.285))|
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)|
|=||(3799.825 / 11017.179)||/||(3388.223 / 9950.344)|
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)|
|=||((1122.699 + 2868.382) / 6317.005)||/||((1631.988 + 2406.273) / 6921.588)|
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|
|=||(849.267 - 19.789||-||1187.165)||/||6317.005|
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.
Sherwin-Williams Co has a M-score of -2.69 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
Sherwin-Williams Co Annual Data
Sherwin-Williams Co Quarterly Data