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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 Toll Brothers Inc was 3.36. The lowest was -3.96. And the median was -1.90.
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 Toll Brothers Inc 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 * 0.7501||+||0.528 * 0.9536||+||0.404 * 0.7743||+||0.892 * 1.4627||+||0.115 * 1.1625|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8699||+||4.679 * -0.0093||-||0.327 * 1.0595|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $252 Mil.|
Revenue was 1350.69 + 1056.857 + 860.374 + 643.681 = $3,912 Mil.
Gross Profit was 288.115 + 239.625 + 172.376 + 129.649 = $830 Mil.
Total Current Assets was $7,359 Mil.
Total Assets was $8,417 Mil.
Property, Plant and Equipment(Net PPE) was $143 Mil.
Depreciation, Depletion and Amortization(DDA) was $23 Mil.
Selling, General & Admin. Expense(SGA) was $433 Mil.
Total Current Liabilities was $1,157 Mil.
Long-Term Debt was $3,400 Mil.
Net Income was 131.524 + 97.707 + 65.222 + 45.58 = $340 Mil.
Non Operating Income was 20.386 + 21.459 + 25.259 + 38.392 = $105 Mil.
Cash Flow from Operations was 274.584 + 104.801 + 184.203 + -250.388 = $313 Mil.
|Accounts Receivable was $229 Mil.
Revenue was 1044.534 + 689.16 + 516.004 + 424.601 = $2,674 Mil.
Gross Profit was 222.273 + 144.071 + 95.991 + 78.664 = $541 Mil.
Total Current Assets was $5,737 Mil.
Total Assets was $6,827 Mil.
Property, Plant and Equipment(Net PPE) was $131 Mil.
Depreciation, Depletion and Amortization(DDA) was $25 Mil.
Selling, General & Admin. Expense(SGA) was $340 Mil.
Total Current Liabilities was $985 Mil.
Long-Term Debt was $2,504 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)|
|=||(251.572 / 3911.602)||/||(229.295 / 2674.299)|
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)|
|=||(239.625 / 2674.299)||/||(288.115 / 3911.602)|
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 - (7358.576 + 143.01) / 8416.902)||/||(1 - (5737.223 + 131.32) / 6827.459)|
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))|
|=||(25.21 / (25.21 + 131.32))||/||(22.999 / (22.999 + 143.01))|
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)|
|=||(432.516 / 3911.602)||/||(339.932 / 2674.299)|
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)|
|=||((3399.586 + 1156.619) / 8416.902)||/||((2503.664 + 984.631) / 6827.459)|
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|
|=||(340.033 - 105.496||-||313.2)||/||8416.902|
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.
Toll Brothers Inc has a M-score of -2.43 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
Toll Brothers Inc Annual Data
Toll Brothers Inc Quarterly Data