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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 Tesco Corp was -0.81. The lowest was -3.48. And the median was -2.26.
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 Tesco 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 * 0.9223||+||0.528 * 1.0165||+||0.404 * 1.0213||+||0.892 * 1.037||+||0.115 * 1.0624|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0828||+||4.679 * -0.0666||-||0.327 * 0.902|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $127.7 Mil.|
Revenue was 141.946 + 145.106 + 121.398 + 136.941 = $545.4 Mil.
Gross Profit was 29.499 + 34.378 + 25.505 + 27.441 = $116.8 Mil.
Total Current Assets was $374.2 Mil.
Total Assets was $627.7 Mil.
Property, Plant and Equipment(Net PPE) was $203.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $40.6 Mil.
Selling, General & Admin. Expense(SGA) was $51.2 Mil.
Total Current Liabilities was $84.7 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 7.486 + 12.74 + 3.018 + 5.513 = $28.8 Mil.
Non Operating Income was -3.174 + 0.975 + -3.345 + -2.474 = $-8.0 Mil.
Cash Flow from Operations was 16.908 + 16.822 + 3.324 + 41.511 = $78.6 Mil.
|Accounts Receivable was $133.5 Mil.
Revenue was 132.248 + 128.968 + 127.095 + 137.626 = $525.9 Mil.
Gross Profit was 29.687 + 30.097 + 25.024 + 29.704 = $114.5 Mil.
Total Current Assets was $356.0 Mil.
Total Assets was $604.7 Mil.
Property, Plant and Equipment(Net PPE) was $201.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $43.3 Mil.
Selling, General & Admin. Expense(SGA) was $45.6 Mil.
Total Current Liabilities was $90.5 Mil.
Long-Term Debt was $0.1 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)|
|=||(127.714 / 545.391)||/||(133.536 / 525.937)|
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)|
|=||(34.378 / 525.937)||/||(29.499 / 545.391)|
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 - (374.158 + 203.751) / 627.724)||/||(1 - (356.02 + 201.721) / 604.728)|
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))|
|=||(43.269 / (43.269 + 201.721))||/||(40.627 / (40.627 + 203.751))|
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)|
|=||(51.227 / 545.391)||/||(45.624 / 525.937)|
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)|
|=||((0.015 + 84.721) / 627.724)||/||((0.051 + 90.451) / 604.728)|
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|
|=||(28.757 - -8.018||-||78.565)||/||627.724|
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.
Tesco Corp has a M-score of -2.79 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
Tesco Corp Annual Data
Tesco Corp Quarterly Data