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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 -2.01.
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 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 * 1||+||0.528 * 1.0901||+||0.404 * 1.3237||+||0.892 * 1.2393||+||0.115 * 1.1687|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9492||+||4.679 * 0.014||-||0.327 * 1.0449|
|This Year (Oct16) TTM:||Last Year (Oct15) TTM:|
|Accounts Receivable was $583 Mil.|
Revenue was 1855.451 + 1269.934 + 1115.557 + 928.566 = $5,170 Mil.
Gross Profit was 285.684 + 278.518 + 244.986 + 216.255 = $1,025 Mil.
Total Current Assets was $8,019 Mil.
Total Assets was $9,737 Mil.
Property, Plant and Equipment(Net PPE) was $251 Mil.
Depreciation, Depletion and Amortization(DDA) was $23 Mil.
Selling, General & Admin. Expense(SGA) was $535 Mil.
Total Current Liabilities was $1,726 Mil.
Long-Term Debt was $3,775 Mil.
Net Income was 114.378 + 105.483 + 89.054 + 73.18 = $382 Mil.
Non Operating Income was 31.907 + 19.443 + 23.219 + 21.954 = $97 Mil.
Cash Flow from Operations was 474.024 + -309.373 + 7.345 + -23.225 = $149 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 1437.202 + 1028.011 + 852.583 + 853.452 = $4,171 Mil.
Gross Profit was 320.87 + 203.617 + 174.071 + 203.42 = $902 Mil.
Total Current Assets was $7,943 Mil.
Total Assets was $9,207 Mil.
Property, Plant and Equipment(Net PPE) was $216 Mil.
Depreciation, Depletion and Amortization(DDA) was $24 Mil.
Selling, General & Admin. Expense(SGA) was $455 Mil.
Total Current Liabilities was $1,188 Mil.
Long-Term Debt was $3,790 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)|
|=||(582.758 / 5169.508)||/||(0 / 4171.248)|
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)|
|=||(901.978 / 4171.248)||/||(1025.443 / 5169.508)|
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 - (8018.973 + 251.269) / 9736.789)||/||(1 - (7943.305 + 215.643) / 9206.515)|
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))|
|=||(23.557 / (23.557 + 215.643))||/||(23.121 / (23.121 + 251.269))|
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)|
|=||(535.382 / 5169.508)||/||(455.108 / 4171.248)|
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)|
|=||((3775.451 + 1726.136) / 9736.789)||/||((3790.24 + 1188.196) / 9206.515)|
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|
|=||(382.095 - 96.523||-||148.771)||/||9736.789|
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 -2.01 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
Toll Brothers Inc Annual Data
Toll Brothers Inc Quarterly Data