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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.
Toro Co has a M-score of -2.04 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Toro Co was -1.58. The lowest was -4.31. 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 * 1.0076||+||0.528 * 0.9976||+||0.404 * 0.8348||+||0.892 * 1.0643||+||0.115 * 5.513|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.97||+||4.679 * -0.0144||-||0.327 * 1.0268|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $158 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 $13 Mil.
Selling, General & Admin. Expense(SGA) was $510 Mil.
Total Current Liabilities was $400 Mil.
Long-Term Debt was $347 Mil.
Net Income was 10.902 + 50.013 + 87.086 + 25.869 = $174 Mil.
Non Operating Income was 2.494 + 2.39 + 1.92 + 1.91 = $9 Mil.
Cash Flow from Operations was 18.152 + 86.264 + 90.543 + -12.594 = $182 Mil.
|Accounts Receivable was $147 Mil.
Revenue was 382.366 + 509.918 + 704.486 + 444.661 = $2,041 Mil.
Gross Profit was 128.648 + 178.031 + 252.301 + 165.817 = $725 Mil.
Total Current Assets was $653 Mil.
Total Assets was $1,003 Mil.
Property, Plant and Equipment(Net PPE) was $185 Mil.
Depreciation, Depletion and Amortization(DDA) was $93 Mil.
Selling, General & Admin. Expense(SGA) was $494 Mil.
Total Current Liabilities was $389 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)|
|=||(158.158 / 2172.691)||/||(147.475 / 2041.431)|
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)|
|=||(202.08 / 2041.431)||/||(143.137 / 2172.691)|
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 - (824.036 + 205.195) / 1192.415)||/||(1 - (653.267 + 185.096) / 1002.748)|
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))|
|=||(93.338 / (93.338 + 185.096))||/||(13.285 / (13.285 + 205.195))|
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)|
|=||(510.114 / 2172.691)||/||(494.135 / 2041.431)|
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)|
|=||((347.316 + 400.42) / 1192.415)||/||((223.544 + 388.845) / 1002.748)|
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|
|=||(173.87 - 8.714||-||182.365)||/||1192.415|
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 -2.04 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