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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 Twin Disc Inc was -1.93. The lowest was -3.30. And the median was -2.61.
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 Twin Disc 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 * 1.0443||+||0.528 * 0.9176||+||0.404 * 0.7975||+||0.892 * 1.0216||+||0.115 * 0.9574|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9678||+||4.679 * -0.0461||-||0.327 * 0.963|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $35.7 Mil.|
Revenue was 60.941 + 72.691 + 64.824 + 73.566 = $272.0 Mil.
Gross Profit was 19.006 + 22.103 + 22.389 + 21.515 = $85.0 Mil.
Total Current Assets was $168.0 Mil.
Total Assets was $246.4 Mil.
Property, Plant and Equipment(Net PPE) was $55.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.4 Mil.
Selling, General & Admin. Expense(SGA) was $65.9 Mil.
Total Current Liabilities was $57.6 Mil.
Long-Term Debt was $8.8 Mil.
Net Income was 2.946 + 3.747 + 4.043 + 2.324 = $13.1 Mil.
Non Operating Income was 0.539 + 0.142 + 0.34 + -0.061 = $1.0 Mil.
Cash Flow from Operations was 6.056 + 9.065 + 0.379 + 7.962 = $23.5 Mil.
|Accounts Receivable was $33.5 Mil.
Revenue was 60.705 + 63.212 + 66.426 + 75.931 = $266.3 Mil.
Gross Profit was 16.528 + 18.544 + 20.667 + 20.623 = $76.4 Mil.
Total Current Assets was $183.2 Mil.
Total Assets was $275.8 Mil.
Property, Plant and Equipment(Net PPE) was $61.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.8 Mil.
Selling, General & Admin. Expense(SGA) was $66.7 Mil.
Total Current Liabilities was $55.8 Mil.
Long-Term Debt was $21.4 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)|
|=||(35.729 / 272.022)||/||(33.489 / 266.274)|
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)|
|=||(22.103 / 266.274)||/||(19.006 / 272.022)|
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 - (168.014 + 55.791) / 246.376)||/||(1 - (183.174 + 60.986) / 275.846)|
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))|
|=||(10.753 / (10.753 + 60.986))||/||(10.356 / (10.356 + 55.791))|
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)|
|=||(65.92 / 272.022)||/||(66.676 / 266.274)|
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)|
|=||((8.829 + 57.582) / 246.376)||/||((21.422 + 55.786) / 275.846)|
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|
|=||(13.06 - 0.96||-||23.462)||/||246.376|
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.
Twin Disc Inc has a M-score of -2.75 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
Twin Disc Inc Annual Data
Twin Disc Inc Quarterly Data