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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 -2.57.
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 * 1.3014||+||0.528 * 1.2193||+||0.404 * 1.6012||+||0.892 * 0.702||+||0.115 * 1.0657|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2983||+||4.679 * -0.0137||-||0.327 * 0.835|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $32.6 Mil.|
Revenue was 41.434 + 44.829 + 37.373 + 67.334 = $191.0 Mil.
Gross Profit was 9.618 + 11.606 + 8.19 + 19.534 = $48.9 Mil.
Total Current Assets was $133.2 Mil.
Total Assets was $218.4 Mil.
Property, Plant and Equipment(Net PPE) was $53.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $9.2 Mil.
Selling, General & Admin. Expense(SGA) was $60.1 Mil.
Total Current Liabilities was $40.9 Mil.
Long-Term Debt was $8.2 Mil.
Net Income was -0.963 + -2.301 + -4.323 + 0.437 = $-7.2 Mil.
Non Operating Income was -0.187 + -0.231 + 0.158 + -0.125 = $-0.4 Mil.
Cash Flow from Operations was -0.886 + -2.077 + -2.372 + 1.56 = $-3.8 Mil.
|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.
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)|
|=||(32.644 / 190.97)||/||(35.729 / 272.022)|
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)|
|=||(85.013 / 272.022)||/||(48.948 / 190.97)|
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 - (133.194 + 53.178) / 218.41)||/||(1 - (168.014 + 55.791) / 246.376)|
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))|
|=||(10.356 / (10.356 + 55.791))||/||(9.158 / (9.158 + 53.178))|
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)|
|=||(60.082 / 190.97)||/||(65.92 / 272.022)|
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)|
|=||((8.227 + 40.931) / 218.41)||/||((8.829 + 57.582) / 246.376)|
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|
|=||(-7.15 - -0.385||-||-3.775)||/||218.41|
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 -2.16 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
Twin Disc Inc Annual Data
Twin Disc Inc Quarterly Data