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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 -1.75. The lowest was -2.91. And the median was -2.62.
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 * 1.1482||+||0.528 * 0.9483||+||0.404 * 1.2567||+||0.892 * 1.0406||+||0.115 * 0.9959|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.009||+||4.679 * 0.0281||-||0.327 * 0.9439|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $371 Mil.|
Revenue was 402.3 + 994.1 + 1245.2 + 245.7 = $2,887 Mil.
Gross Profit was 99.7 + 357.4 + 521.6 + 42.6 = $1,021 Mil.
Total Current Assets was $992 Mil.
Total Assets was $2,809 Mil.
Property, Plant and Equipment(Net PPE) was $471 Mil.
Depreciation, Depletion and Amortization(DDA) was $74 Mil.
Selling, General & Admin. Expense(SGA) was $576 Mil.
Total Current Liabilities was $593 Mil.
Long-Term Debt was $1,131 Mil.
Net Income was -26.6 + 213.1 + 210.1 + -81.3 = $315 Mil.
Non Operating Income was 11.3 + -3.5 + 0 + -8.8 = $-1 Mil.
Cash Flow from Operations was 266.3 + 598.9 + -289.2 + -338.6 = $237 Mil.
|Accounts Receivable was $311 Mil.
Revenue was 375.4 + 1111.3 + 1071.8 + 216.2 = $2,775 Mil.
Gross Profit was 90.8 + 385.8 + 424.8 + 29.3 = $931 Mil.
Total Current Assets was $1,119 Mil.
Total Assets was $2,527 Mil.
Property, Plant and Equipment(Net PPE) was $444 Mil.
Depreciation, Depletion and Amortization(DDA) was $69 Mil.
Selling, General & Admin. Expense(SGA) was $548 Mil.
Total Current Liabilities was $619 Mil.
Long-Term Debt was $1,025 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)|
|=||(371.1 / 2887.3)||/||(310.6 / 2774.7)|
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)|
|=||(930.7 / 2774.7)||/||(1021.3 / 2887.3)|
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 - (991.7 + 470.8) / 2808.8)||/||(1 - (1119.2 + 444.1) / 2527.2)|
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))|
|=||(69 / (69 + 444.1))||/||(73.5 / (73.5 + 470.8))|
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)|
|=||(575.7 / 2887.3)||/||(548.3 / 2774.7)|
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)|
|=||((1131.1 + 593.1) / 2808.8)||/||((1025 + 618.6) / 2527.2)|
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|
|=||(315.3 - -1||-||237.4)||/||2808.8|
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 -2.08 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