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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 -0.12. The lowest was -7.49. And the median was -2.86.
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 * 0.5539||+||0.528 * 0.7075||+||0.404 * 0.9484||+||0.892 * 1.0418||+||0.115 * 0.9378|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0545||+||4.679 * -0.0723||-||0.327 * 1.1471|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (May16) TTM:||Last Year (May15) TTM:|
|Accounts Receivable was $20.4 Mil.|
Revenue was 165.239 + 133.16 + 145.803 + 175.266 = $619.5 Mil.
Gross Profit was 70.796 + 51.488 + 57.585 + 73.989 = $253.9 Mil.
Total Current Assets was $171.6 Mil.
Total Assets was $679.7 Mil.
Property, Plant and Equipment(Net PPE) was $391.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $44.7 Mil.
Selling, General & Admin. Expense(SGA) was $84.1 Mil.
Total Current Liabilities was $72.9 Mil.
Long-Term Debt was $596.1 Mil.
Net Income was 15.353 + 10.819 + 12.458 + 26.296 = $64.9 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 39.474 + 12.99 + 25.768 + 35.86 = $114.1 Mil.
|Accounts Receivable was $35.4 Mil.
Revenue was 164.748 + 126.219 + 139.856 + 163.769 = $594.6 Mil.
Gross Profit was 68.168 + 46.587 + 53.407 + 4.222 = $172.4 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.
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)|
|=||(20.401 / 619.468)||/||(35.35 / 594.592)|
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)|
|=||(172.384 / 594.592)||/||(253.858 / 619.468)|
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 - (171.565 + 391.629) / 679.666)||/||(1 - (80.107 + 430.308) / 622.985)|
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))|
|=||(45.757 / (45.757 + 430.308))||/||(44.719 / (44.719 + 391.629))|
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)|
|=||(84.053 / 619.468)||/||(76.51 / 594.592)|
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)|
|=||((596.066 + 72.9) / 679.666)||/||((452.855 + 81.713) / 622.985)|
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|
|=||(64.926 - 0||-||114.092)||/||679.666|
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 -3.43 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