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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 * 0.9738||+||0.528 * 0.9742||+||0.404 * 0.998||+||0.892 * 1.0798||+||0.115 * 0.9565|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0026||+||4.679 * -0.0419||-||0.327 * 1.3301|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $1,235 Mil.|
Revenue was 2450.284 + 2569.412 + 3150.57 + 3042.995 = $11,213 Mil.
Gross Profit was 1132.449 + 1217.975 + 1470.955 + 1409.653 = $5,231 Mil.
Total Current Assets was $2,766 Mil.
Total Assets was $5,859 Mil.
Property, Plant and Equipment(Net PPE) was $998 Mil.
Depreciation, Depletion and Amortization(DDA) was $199 Mil.
Selling, General & Admin. Expense(SGA) was $3,868 Mil.
Total Current Liabilities was $3,379 Mil.
Long-Term Debt was $1,123 Mil.
Net Income was 131.404 + 132.743 + 326.24 + 291.447 = $882 Mil.
Non Operating Income was 1.918 + -3.837 + 14.593 + 5.147 = $18 Mil.
Cash Flow from Operations was -55.068 + 200.218 + 549.73 + 414.699 = $1,110 Mil.
|Accounts Receivable was $1,174 Mil.
Revenue was 2366.556 + 2457.058 + 2847.417 + 2713.889 = $10,385 Mil.
Gross Profit was 1065.901 + 1124.178 + 1295.958 + 1233.579 = $4,720 Mil.
Total Current Assets was $2,967 Mil.
Total Assets was $6,189 Mil.
Property, Plant and Equipment(Net PPE) was $1,004 Mil.
Depreciation, Depletion and Amortization(DDA) was $190 Mil.
Selling, General & Admin. Expense(SGA) was $3,573 Mil.
Total Current Liabilities was $2,453 Mil.
Long-Term Debt was $1,122 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)|
|=||(1234.612 / 11213.261)||/||(1174.116 / 10384.92)|
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)|
|=||(1217.975 / 10384.92)||/||(1132.449 / 11213.261)|
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 - (2765.79 + 998.432) / 5859.25)||/||(1 - (2967.478 + 1004.394) / 6189.225)|
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))|
|=||(190.198 / (190.198 + 1004.394))||/||(199.39 / (199.39 + 998.432))|
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)|
|=||(3868.075 / 11213.261)||/||(3573.09 / 10384.92)|
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)|
|=||((1122.741 + 3379.045) / 5859.25)||/||((1122.396 + 2452.644) / 6189.225)|
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|
|=||(881.834 - 17.821||-||1109.579)||/||5859.25|
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 -2.76 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