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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 * 1.0482||+||0.528 * 1.0115||+||0.404 * 1.3316||+||0.892 * 1.0621||+||0.115 * 0.9484|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9979||+||4.679 * -0.0049||-||0.327 * 1.0409|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $206 Mil.|
Revenue was 245.7 + 483.2 + 1214.8 + 1102.3 = $3,046 Mil.
Gross Profit was 42.6 + 153.1 + 449.2 + 433.3 = $1,078 Mil.
Total Current Assets was $1,148 Mil.
Total Assets was $2,727 Mil.
Property, Plant and Equipment(Net PPE) was $449 Mil.
Depreciation, Depletion and Amortization(DDA) was $71 Mil.
Selling, General & Admin. Expense(SGA) was $724 Mil.
Total Current Liabilities was $446 Mil.
Long-Term Debt was $1,504 Mil.
Net Income was -81.3 + -23.6 + 133.4 + 124.6 = $153 Mil.
Non Operating Income was -8.8 + 0 + 0 + 0 = $-9 Mil.
Cash Flow from Operations was -338.6 + 222.7 + 672.9 + -381.7 = $175 Mil.
|Accounts Receivable was $185 Mil.
Revenue was 216.2 + 454.3 + 1116.4 + 1081 = $2,868 Mil.
Gross Profit was 29.3 + 140.4 + 423.3 + 433.8 = $1,027 Mil.
Total Current Assets was $1,126 Mil.
Total Assets was $2,265 Mil.
Property, Plant and Equipment(Net PPE) was $434 Mil.
Depreciation, Depletion and Amortization(DDA) was $65 Mil.
Selling, General & Admin. Expense(SGA) was $683 Mil.
Total Current Liabilities was $422 Mil.
Long-Term Debt was $1,133 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)|
|=||(206.4 / 3046)||/||(185.4 / 2867.9)|
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)|
|=||(153.1 / 2867.9)||/||(42.6 / 3046)|
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 - (1148 + 449.2) / 2727.4)||/||(1 - (1125.9 + 434.4) / 2265.2)|
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))|
|=||(64.5 / (64.5 + 434.4))||/||(70.9 / (70.9 + 449.2))|
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)|
|=||(724.1 / 3046)||/||(683.2 / 2867.9)|
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)|
|=||((1503.6 + 445.6) / 2727.4)||/||((1133.3 + 421.9) / 2265.2)|
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|
|=||(153.1 - -8.8||-||175.3)||/||2727.4|
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 -2.28 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
The Scotts Miracle Gro Co Annual Data
The Scotts Miracle Gro Co Quarterly Data