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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 -3.12. 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 * 0.9425||+||0.528 * 0.9768||+||0.404 * 1.0758||+||0.892 * 1.0927||+||0.115 * 0.9524|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0089||+||4.679 * -0.0405||-||0.327 * 1.1653|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $1,131 Mil.|
Revenue was 2569.412 + 3150.57 + 3042.995 + 2366.556 = $11,130 Mil.
Gross Profit was 1217.975 + 1470.955 + 1409.653 + 1065.901 = $5,164 Mil.
Total Current Assets was $2,567 Mil.
Total Assets was $5,706 Mil.
Property, Plant and Equipment(Net PPE) was $1,021 Mil.
Depreciation, Depletion and Amortization(DDA) was $199 Mil.
Selling, General & Admin. Expense(SGA) was $3,823 Mil.
Total Current Liabilities was $2,681 Mil.
Long-Term Debt was $1,123 Mil.
Net Income was 132.743 + 326.24 + 291.447 + 115.457 = $866 Mil.
Non Operating Income was -3.837 + 14.593 + 5.147 + -0.503 = $15 Mil.
Cash Flow from Operations was 200.218 + 549.73 + 414.699 + -83.119 = $1,082 Mil.
|Accounts Receivable was $1,098 Mil.
Revenue was 2457.058 + 2847.417 + 2713.889 + 2167.168 = $10,186 Mil.
Gross Profit was 1124.178 + 1295.958 + 1233.579 + 962.851 = $4,617 Mil.
Total Current Assets was $3,159 Mil.
Total Assets was $6,383 Mil.
Property, Plant and Equipment(Net PPE) was $1,021 Mil.
Depreciation, Depletion and Amortization(DDA) was $188 Mil.
Selling, General & Admin. Expense(SGA) was $3,468 Mil.
Total Current Liabilities was $2,529 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)|
|=||(1130.565 / 11129.533)||/||(1097.751 / 10185.532)|
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)|
|=||(1470.955 / 10185.532)||/||(1217.975 / 11129.533)|
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 - (2566.78 + 1021.03) / 5706.052)||/||(1 - (3158.717 + 1021.383) / 6382.507)|
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))|
|=||(187.794 / (187.794 + 1021.383))||/||(198.945 / (198.945 + 1021.03))|
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)|
|=||(3822.966 / 11129.533)||/||(3467.681 / 10185.532)|
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)|
|=||((1122.715 + 2680.666) / 5706.052)||/||((1122.373 + 2528.557) / 6382.507)|
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|
|=||(865.887 - 15.4||-||1081.528)||/||5706.052|
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 -2.68 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
Sherwin-Williams Co Annual Data
Sherwin-Williams Co Quarterly Data