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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 Sonic Corp was -0.97. The lowest was -8.32. And the median was -3.09.
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 Sonic Corp 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 * 1.0025||+||0.528 * 0.9551||+||0.404 * 0.9621||+||0.892 * 1.0742||+||0.115 * 0.9255|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0158||+||4.679 * -0.1136||-||0.327 * 1.0645|
|This Year (Feb15) TTM:||Last Year (Feb14) TTM:|
|Accounts Receivable was $35.2 Mil.|
Revenue was 126.219 + 139.856 + 163.769 + 152.187 = $582.0 Mil.
Gross Profit was 46.587 + 53.407 + 66.271 + 60.47 = $226.7 Mil.
Total Current Assets was $78.7 Mil.
Total Assets was $625.8 Mil.
Property, Plant and Equipment(Net PPE) was $434.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $45.3 Mil.
Selling, General & Admin. Expense(SGA) was $73.5 Mil.
Total Current Liabilities was $65.0 Mil.
Long-Term Debt was $493.5 Mil.
Net Income was 7.662 + 10.085 + 18.825 + 16.776 = $53.3 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 23.084 + 33.699 + 32.49 + 35.138 = $124.4 Mil.
|Accounts Receivable was $32.7 Mil.
Revenue was 109.741 + 126.652 + 158.802 + 146.634 = $541.8 Mil.
Gross Profit was 38.23 + 45.269 + 61.527 + 56.578 = $201.6 Mil.
Total Current Assets was $87.8 Mil.
Total Assets was $618.6 Mil.
Property, Plant and Equipment(Net PPE) was $415.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $39.8 Mil.
Selling, General & Admin. Expense(SGA) was $67.3 Mil.
Total Current Liabilities was $61.1 Mil.
Long-Term Debt was $457.5 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)|
|=||(35.192 / 582.031)||/||(32.681 / 541.829)|
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)|
|=||(53.407 / 541.829)||/||(46.587 / 582.031)|
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 - (78.72 + 434.678) / 625.812)||/||(1 - (87.784 + 415.334) / 618.623)|
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))|
|=||(39.788 / (39.788 + 415.334))||/||(45.344 / (45.344 + 434.678))|
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)|
|=||(73.45 / 582.031)||/||(67.316 / 541.829)|
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)|
|=||((493.498 + 64.975) / 625.812)||/||((457.505 + 61.105) / 618.623)|
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|
|=||(53.348 - 0||-||124.411)||/||625.812|
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.
Sonic Corp has a M-score of -3.01 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
Sonic Corp Annual Data
Sonic Corp Quarterly Data