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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 Toro Co was -2.08. The lowest was -3.87. And the median was -2.78.
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 Toro 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 * 1.0269||+||0.528 * 1.0179||+||0.404 * 2.0626||+||0.892 * 1.1004||+||0.115 * 0.95|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9563||+||4.679 * -0.0349||-||0.327 * 0.9768|
|This Year (Oct15) TTM:||Last Year (Oct14) TTM:|
|Accounts Receivable was $171 Mil.|
Revenue was 480.807 + 609.615 + 826.242 + 474.211 = $2,391 Mil.
Gross Profit was 168.574 + 216.39 + 281.972 + 168.999 = $836 Mil.
Total Current Assets was $711 Mil.
Total Assets was $1,304 Mil.
Property, Plant and Equipment(Net PPE) was $225 Mil.
Depreciation, Depletion and Amortization(DDA) was $78 Mil.
Selling, General & Admin. Expense(SGA) was $537 Mil.
Total Current Liabilities was $444 Mil.
Long-Term Debt was $355 Mil.
Net Income was 23.554 + 53.324 + 93.763 + 30.95 = $202 Mil.
Non Operating Income was 2.665 + 2.798 + 2.45 + 2.267 = $10 Mil.
Cash Flow from Operations was 68.855 + 72.766 + 118.639 + -23.391 = $237 Mil.
|Accounts Receivable was $151 Mil.
Revenue was 414.14 + 567.54 + 745.03 + 445.981 = $2,173 Mil.
Gross Profit was 143.137 + 202.08 + 264.54 + 163.514 = $773 Mil.
Total Current Assets was $824 Mil.
Total Assets was $1,192 Mil.
Property, Plant and Equipment(Net PPE) was $205 Mil.
Depreciation, Depletion and Amortization(DDA) was $66 Mil.
Selling, General & Admin. Expense(SGA) was $510 Mil.
Total Current Liabilities was $400 Mil.
Long-Term Debt was $347 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)|
|=||(171.172 / 2390.875)||/||(151.479 / 2172.691)|
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)|
|=||(216.39 / 2172.691)||/||(168.574 / 2390.875)|
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 - (710.679 + 224.995) / 1303.658)||/||(1 - (824.036 + 205.195) / 1192.415)|
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))|
|=||(66.423 / (66.423 + 205.195))||/||(77.992 / (77.992 + 224.995))|
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)|
|=||(536.821 / 2390.875)||/||(510.114 / 2172.691)|
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)|
|=||((354.818 + 443.734) / 1303.658)||/||((347.316 + 400.42) / 1192.415)|
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|
|=||(201.591 - 10.18||-||236.869)||/||1303.658|
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.
Toro Co has a M-score of -2.08 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
Toro Co Annual Data
Toro Co Quarterly Data