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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 * 0.9982||+||0.528 * 0.9623||+||0.404 * 0.867||+||0.892 * 1.033||+||0.115 * 1.0451|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0172||+||4.679 * -0.051||-||0.327 * 0.9263|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $1,458 Mil.|
Revenue was 3279.462 + 3219.525 + 2574.024 + 2604.596 = $11,678 Mil.
Gross Profit was 1636.289 + 1635.793 + 1261.745 + 1322.239 = $5,856 Mil.
Total Current Assets was $3,708 Mil.
Total Assets was $6,918 Mil.
Property, Plant and Equipment(Net PPE) was $1,084 Mil.
Depreciation, Depletion and Amortization(DDA) was $200 Mil.
Selling, General & Admin. Expense(SGA) was $4,106 Mil.
Total Current Liabilities was $2,516 Mil.
Long-Term Debt was $1,910 Mil.
Net Income was 386.733 + 378.064 + 147.128 + 198.017 = $1,110 Mil.
Non Operating Income was 0.725 + 0.052 + -17.78 + -31.857 = $-49 Mil.
Cash Flow from Operations was 456.551 + 589.79 + -79.807 + 544.959 = $1,511 Mil.
|Accounts Receivable was $1,414 Mil.
Revenue was 3152.285 + 3132.139 + 2450.284 + 2569.412 = $11,304 Mil.
Gross Profit was 1574.552 + 1529.986 + 1132.449 + 1217.975 = $5,455 Mil.
Total Current Assets was $2,924 Mil.
Total Assets was $6,102 Mil.
Property, Plant and Equipment(Net PPE) was $1,015 Mil.
Depreciation, Depletion and Amortization(DDA) was $198 Mil.
Selling, General & Admin. Expense(SGA) was $3,907 Mil.
Total Current Liabilities was $2,294 Mil.
Long-Term Debt was $1,920 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)|
|=||(1458.073 / 11677.607)||/||(1413.946 / 11304.12)|
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)|
|=||(5454.962 / 11304.12)||/||(5856.066 / 11677.607)|
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 - (3708.231 + 1083.922) / 6917.771)||/||(1 - (2924.236 + 1015.167) / 6102.023)|
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))|
|=||(197.514 / (197.514 + 1015.167))||/||(200.106 / (200.106 + 1083.922))|
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)|
|=||(4105.927 / 11677.607)||/||(3907.375 / 11304.12)|
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)|
|=||((1909.713 + 2515.807) / 6917.771)||/||((1920.15 + 2294.196) / 6102.023)|
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|
|=||(1109.942 - -48.86||-||1511.493)||/||6917.771|
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 -2.74 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