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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 The Scotts Miracle Gro Co was -1.92. The lowest was -3.27. And the median was -2.61.
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 The Scotts Miracle Gro 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 * 0.9975||+||0.528 * 0.9733||+||0.404 * 1.5534||+||0.892 * 1.1155||+||0.115 * 0.9042|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9568||+||4.679 * -0.0055||-||0.327 * 1.0219|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $1,163 Mil.|
Revenue was 1245.2 + 245.7 + 483.2 + 1214.8 = $3,189 Mil.
Gross Profit was 521.6 + 42.6 + 153.1 + 449.2 = $1,167 Mil.
Total Current Assets was $2,209 Mil.
Total Assets was $3,686 Mil.
Property, Plant and Equipment(Net PPE) was $436 Mil.
Depreciation, Depletion and Amortization(DDA) was $74 Mil.
Selling, General & Admin. Expense(SGA) was $705 Mil.
Total Current Liabilities was $986 Mil.
Long-Term Debt was $1,765 Mil.
Net Income was 210.1 + -81.3 + -23.6 + 133.4 = $239 Mil.
Non Operating Income was 0 + -8.8 + 0 + 0 = $-9 Mil.
Cash Flow from Operations was -289.2 + -338.6 + 222.7 + 672.9 = $268 Mil.
|Accounts Receivable was $1,045 Mil.
Revenue was 1071.8 + 216.2 + 454.3 + 1116.4 = $2,859 Mil.
Gross Profit was 424.8 + 29.3 + 140.4 + 423.3 = $1,018 Mil.
Total Current Assets was $2,036 Mil.
Total Assets was $3,010 Mil.
Property, Plant and Equipment(Net PPE) was $427 Mil.
Depreciation, Depletion and Amortization(DDA) was $64 Mil.
Selling, General & Admin. Expense(SGA) was $661 Mil.
Total Current Liabilities was $991 Mil.
Long-Term Debt was $1,208 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)|
|=||(1163.1 / 3188.9)||/||(1045.3 / 2858.7)|
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)|
|=||(42.6 / 2858.7)||/||(521.6 / 3188.9)|
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 - (2208.8 + 436.3) / 3685.6)||/||(1 - (2035.6 + 427.2) / 3009.8)|
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))|
|=||(64.3 / (64.3 + 427.2))||/||(73.8 / (73.8 + 436.3))|
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)|
|=||(705.2 / 3188.9)||/||(660.7 / 2858.7)|
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)|
|=||((1764.8 + 985.9) / 3685.6)||/||((1207.5 + 990.6) / 3009.8)|
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|
|=||(238.6 - -8.8||-||267.8)||/||3685.6|
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.
The Scotts Miracle Gro Co has a M-score of -2.21 signals that the company is likely to 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
The Scotts Miracle Gro Co Annual Data
The Scotts Miracle Gro Co Quarterly Data