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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 -4.47. And the median was -2.75.
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 * 0.8871||+||0.528 * 0.9668||+||0.404 * 0.9463||+||0.892 * 1.0575||+||0.115 * 0.8901|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9892||+||4.679 * -0.0459||-||0.327 * 0.9175|
|This Year (Apr16) TTM:||Last Year (Apr15) TTM:|
|Accounts Receivable was $330 Mil.|
Revenue was 836.441 + 486.398 + 480.807 + 609.615 = $2,413 Mil.
Gross Profit was 303.187 + 182.654 + 168.574 + 216.39 = $871 Mil.
Total Current Assets was $950 Mil.
Total Assets was $1,543 Mil.
Property, Plant and Equipment(Net PPE) was $222 Mil.
Depreciation, Depletion and Amortization(DDA) was $17 Mil.
Selling, General & Admin. Expense(SGA) was $546 Mil.
Total Current Liabilities was $601 Mil.
Long-Term Debt was $338 Mil.
Net Income was 105.681 + 39.261 + 23.554 + 53.324 = $222 Mil.
Non Operating Income was 3.873 + 4.512 + 2.665 + 2.798 = $14 Mil.
Cash Flow from Operations was 135.914 + 1.24 + 68.855 + 72.766 = $279 Mil.
|Accounts Receivable was $352 Mil.
Revenue was 826.242 + 474.211 + 414.14 + 567.54 = $2,282 Mil.
Gross Profit was 281.972 + 168.999 + 143.137 + 202.08 = $796 Mil.
Total Current Assets was $884 Mil.
Total Assets was $1,479 Mil.
Property, Plant and Equipment(Net PPE) was $220 Mil.
Depreciation, Depletion and Amortization(DDA) was $15 Mil.
Selling, General & Admin. Expense(SGA) was $522 Mil.
Total Current Liabilities was $619 Mil.
Long-Term Debt was $361 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)|
|=||(329.837 / 2413.261)||/||(351.602 / 2282.133)|
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)|
|=||(796.188 / 2282.133)||/||(870.805 / 2413.261)|
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 - (950.107 + 222.069) / 1542.741)||/||(1 - (883.749 + 219.941) / 1479.127)|
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))|
|=||(15.034 / (15.034 + 219.941))||/||(17.199 / (17.199 + 222.069))|
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)|
|=||(545.639 / 2413.261)||/||(521.631 / 2282.133)|
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)|
|=||((337.909 + 600.601) / 1542.741)||/||((361.428 + 619.24) / 1479.127)|
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|
|=||(221.82 - 13.848||-||278.775)||/||1542.741|
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 -2.77 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
Toro Co Annual Data
Toro Co Quarterly Data