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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 -2.60.
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 * 1.1754||+||0.528 * 0.9322||+||0.404 * 0.784||+||0.892 * 0.9926||+||0.115 * 0.9579|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0061||+||4.679 * -0.0247||-||0.327 * 0.985|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $40.7 Mil.|
Revenue was 72.691 + 64.824 + 73.566 + 60.705 = $271.8 Mil.
Gross Profit was 22.103 + 22.389 + 21.515 + 16.528 = $82.5 Mil.
Total Current Assets was $173.7 Mil.
Total Assets was $255.0 Mil.
Property, Plant and Equipment(Net PPE) was $57.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.6 Mil.
Selling, General & Admin. Expense(SGA) was $67.1 Mil.
Total Current Liabilities was $55.6 Mil.
Long-Term Debt was $13.2 Mil.
Net Income was 3.747 + 4.043 + 2.324 + -0.475 = $9.6 Mil.
Non Operating Income was 0.142 + 0.34 + -0.061 + -0.068 = $0.4 Mil.
Cash Flow from Operations was 9.065 + 0.379 + 7.962 + -1.83 = $15.6 Mil.
|Accounts Receivable was $34.9 Mil.
Revenue was 63.212 + 66.426 + 75.931 + 68.232 = $273.8 Mil.
Gross Profit was 18.544 + 20.667 + 20.623 + 17.674 = $77.5 Mil.
Total Current Assets was $181.1 Mil.
Total Assets was $274.5 Mil.
Property, Plant and Equipment(Net PPE) was $61.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.7 Mil.
Selling, General & Admin. Expense(SGA) was $67.2 Mil.
Total Current Liabilities was $57.7 Mil.
Long-Term Debt was $17.4 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)|
|=||(40.727 / 271.786)||/||(34.907 / 273.801)|
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)|
|=||(22.389 / 273.801)||/||(22.103 / 271.786)|
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 - (173.739 + 57.745) / 255.039)||/||(1 - (181.087 + 61.1) / 274.529)|
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))|
|=||(10.691 / (10.691 + 61.1))||/||(10.63 / (10.63 + 57.745))|
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)|
|=||(67.121 / 271.786)||/||(67.211 / 273.801)|
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)|
|=||((13.172 + 55.589) / 255.039)||/||((17.422 + 57.721) / 274.529)|
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|
|=||(9.639 - 0.353||-||15.576)||/||255.039|
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 -2.56 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