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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 -2.60.
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 * 0.9198||+||0.528 * 0.9251||+||0.404 * 1.2708||+||0.892 * 1.1035||+||0.115 * 0.951|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0646||+||4.679 * 0.042||-||0.327 * 0.943|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $795 Mil.|
Revenue was 994.1 + 1245.2 + 245.7 + 663.9 = $3,149 Mil.
Gross Profit was 357.4 + 521.6 + 42.6 + 247.7 = $1,169 Mil.
Total Current Assets was $1,481 Mil.
Total Assets was $3,260 Mil.
Property, Plant and Equipment(Net PPE) was $450 Mil.
Depreciation, Depletion and Amortization(DDA) was $73 Mil.
Selling, General & Admin. Expense(SGA) was $752 Mil.
Total Current Liabilities was $991 Mil.
Long-Term Debt was $1,130 Mil.
Net Income was 213.1 + 210.1 + -81.3 + -23.6 = $318 Mil.
Non Operating Income was -3.5 + 0 + -8.8 + 0 = $-12 Mil.
Cash Flow from Operations was 598.9 + -289.2 + -338.6 + 222.7 = $194 Mil.
|Accounts Receivable was $783 Mil.
Revenue was 1111.3 + 1071.8 + 216.2 + 454.3 = $2,854 Mil.
Gross Profit was 385.8 + 424.8 + 29.3 + 140.4 = $980 Mil.
Total Current Assets was $1,612 Mil.
Total Assets was $3,018 Mil.
Property, Plant and Equipment(Net PPE) was $438 Mil.
Depreciation, Depletion and Amortization(DDA) was $67 Mil.
Selling, General & Admin. Expense(SGA) was $640 Mil.
Total Current Liabilities was $1,348 Mil.
Long-Term Debt was $735 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)|
|=||(794.8 / 3148.9)||/||(783.1 / 2853.6)|
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)|
|=||(980.3 / 2853.6)||/||(1169.3 / 3148.9)|
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 - (1481.1 + 449.6) / 3259.7)||/||(1 - (1611.9 + 437.9) / 3018.1)|
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))|
|=||(66.9 / (66.9 + 437.9))||/||(72.8 / (72.8 + 449.6))|
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)|
|=||(751.5 / 3148.9)||/||(639.7 / 2853.6)|
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)|
|=||((1130.3 + 991.2) / 3259.7)||/||((734.9 + 1348.2) / 3018.1)|
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|
|=||(318.3 - -12.3||-||193.8)||/||3259.7|
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 -2.19 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