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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 -4.52. And the median was -3.01.
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 * 1.7744||+||0.528 * 1.264||+||0.404 * 1.0184||+||0.892 * 1.0862||+||0.115 * 0.9092|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0356||+||4.679 * -0.122||-||0.327 * 1.047|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (May15) TTM:||Last Year (May14) TTM:|
|Accounts Receivable was $35.4 Mil.|
Revenue was 164.748 + 126.219 + 139.856 + 163.769 = $594.6 Mil.
Gross Profit was 91.123 + 46.587 + 53.407 + 4.222 = $195.3 Mil.
Total Current Assets was $80.1 Mil.
Total Assets was $623.0 Mil.
Property, Plant and Equipment(Net PPE) was $430.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $45.8 Mil.
Selling, General & Admin. Expense(SGA) was $76.5 Mil.
Total Current Liabilities was $81.7 Mil.
Long-Term Debt was $452.9 Mil.
Net Income was 20.442 + 7.662 + 10.085 + 18.825 = $57.0 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 43.719 + 23.084 + 33.699 + 32.49 = $133.0 Mil.
|Accounts Receivable was $18.3 Mil.
Revenue was 152.187 + 109.741 + 126.652 + 158.802 = $547.4 Mil.
Gross Profit was 82.275 + 38.23 + 45.269 + 61.527 = $227.3 Mil.
Total Current Assets was $99.1 Mil.
Total Assets was $641.4 Mil.
Property, Plant and Equipment(Net PPE) was $428.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $41.0 Mil.
Selling, General & Admin. Expense(SGA) was $68.0 Mil.
Total Current Liabilities was $71.9 Mil.
Long-Term Debt was $453.7 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)|
|=||(35.35 / 594.592)||/||(18.34 / 547.382)|
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)|
|=||(46.587 / 547.382)||/||(91.123 / 594.592)|
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 - (80.107 + 430.308) / 622.985)||/||(1 - (99.135 + 428.432) / 641.359)|
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))|
|=||(41.027 / (41.027 + 428.432))||/||(45.757 / (45.757 + 430.308))|
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)|
|=||(76.51 / 594.592)||/||(68.012 / 547.382)|
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)|
|=||((452.855 + 81.713) / 622.985)||/||((453.713 + 71.937) / 641.359)|
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|
|=||(57.014 - 0||-||132.992)||/||622.985|
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 -2.15 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
Sonic Corp Annual Data
Sonic Corp Quarterly Data