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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 -1.58. The lowest was -4.25. And the median was -2.76.
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 * 0.9535||+||0.528 * 0.9996||+||0.404 * 1.7519||+||0.892 * 1.0774||+||0.115 * 5.1005|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9549||+||4.679 * -0.0009||-||0.327 * 1.0286|
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $205 Mil.|
Revenue was 474.211 + 414.14 + 567.54 + 745.03 = $2,201 Mil.
Gross Profit was 168.999 + 143.137 + 202.08 + 264.54 = $779 Mil.
Total Current Assets was $734 Mil.
Total Assets was $1,322 Mil.
Property, Plant and Equipment(Net PPE) was $215 Mil.
Depreciation, Depletion and Amortization(DDA) was $15 Mil.
Selling, General & Admin. Expense(SGA) was $512 Mil.
Total Current Liabilities was $508 Mil.
Long-Term Debt was $365 Mil.
Net Income was 30.95 + 10.902 + 50.013 + 87.086 = $179 Mil.
Non Operating Income was 2.267 + 2.029 + 2.39 + 1.92 = $9 Mil.
Cash Flow from Operations was -23.391 + 18.152 + 86.264 + 90.543 = $172 Mil.
|Accounts Receivable was $200 Mil.
Revenue was 445.981 + 382.366 + 509.918 + 704.486 = $2,043 Mil.
Gross Profit was 163.514 + 128.648 + 178.031 + 252.301 = $722 Mil.
Total Current Assets was $683 Mil.
Total Assets was $1,040 Mil.
Property, Plant and Equipment(Net PPE) was $189 Mil.
Depreciation, Depletion and Amortization(DDA) was $93 Mil.
Selling, General & Admin. Expense(SGA) was $497 Mil.
Total Current Liabilities was $443 Mil.
Long-Term Debt was $224 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)|
|=||(205.287 / 2200.921)||/||(199.829 / 2042.751)|
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)|
|=||(143.137 / 2042.751)||/||(168.999 / 2200.921)|
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 - (734.089 + 214.783) / 1322.168)||/||(1 - (682.872 + 189.186) / 1039.595)|
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))|
|=||(93.106 / (93.106 + 189.186))||/||(14.849 / (14.849 + 214.783))|
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)|
|=||(511.775 / 2200.921)||/||(497.438 / 2042.751)|
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)|
|=||((364.662 + 508.208) / 1322.168)||/||((223.839 + 443.427) / 1039.595)|
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|
|=||(178.951 - 8.606||-||171.568)||/||1322.168|
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 -1.68 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