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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 Tiffany & Co was -1.36. The lowest was -3.05. And the median was -2.35.
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 Tiffany & 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 * 1.1271||+||0.528 * 0.9753||+||0.404 * 0.8783||+||0.892 * 0.9749||+||0.115 * 0.9729|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0483||+||4.679 * -0.0505||-||0.327 * 0.999|
|This Year (Jan17) TTM:||Last Year (Jan16) TTM:|
|Accounts Receivable was $227 Mil.|
Revenue was 1229.6 + 949.3 + 931.6 + 891.3 = $4,002 Mil.
Gross Profit was 788.2 + 579.5 + 577.1 + 545.6 = $2,490 Mil.
Total Current Assets was $3,574 Mil.
Total Assets was $5,098 Mil.
Property, Plant and Equipment(Net PPE) was $932 Mil.
Depreciation, Depletion and Amortization(DDA) was $209 Mil.
Selling, General & Admin. Expense(SGA) was $1,769 Mil.
Total Current Liabilities was $633 Mil.
Long-Term Debt was $878 Mil.
Net Income was 157.8 + 95.1 + 105.7 + 87.5 = $446 Mil.
Non Operating Income was 1.4 + 0 + 0 + 0 = $1 Mil.
Cash Flow from Operations was 298.5 + 197.6 + 126.9 + 79.1 = $702 Mil.
|Accounts Receivable was $206 Mil.
Revenue was 1213.7 + 938.2 + 990.5 + 962.4 = $4,105 Mil.
Gross Profit was 764.8 + 564.5 + 593 + 569 = $2,491 Mil.
Total Current Assets was $3,508 Mil.
Total Assets was $5,122 Mil.
Property, Plant and Equipment(Net PPE) was $936 Mil.
Depreciation, Depletion and Amortization(DDA) was $203 Mil.
Selling, General & Admin. Expense(SGA) was $1,731 Mil.
Total Current Liabilities was $730 Mil.
Long-Term Debt was $790 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)|
|=||(226.8 / 4001.8)||/||(206.4 / 4104.8)|
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)|
|=||(2491.3 / 4104.8)||/||(2490.4 / 4001.8)|
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 - (3573.6 + 931.8) / 5097.6)||/||(1 - (3508.4 + 935.8) / 5121.6)|
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))|
|=||(202.5 / (202.5 + 935.8))||/||(208.5 / (208.5 + 931.8))|
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)|
|=||(1769.2 / 4001.8)||/||(1731.2 / 4104.8)|
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)|
|=||((878.4 + 632.8) / 5097.6)||/||((790 + 729.9) / 5121.6)|
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|
|=||(446.1 - 1.4||-||702.1)||/||5097.6|
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.
Tiffany & Co has a M-score of -2.70 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
Tiffany & Co Annual Data
Tiffany & Co Quarterly Data