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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 Valspar Corp was -1.94. The lowest was -3.13. And the median was -2.51.
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 Valspar Corp 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 * 1.0252||+||0.528 * 0.9692||+||0.404 * 0.9776||+||0.892 * 1.0887||+||0.115 * 0.9768|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0364||+||4.679 * 0.0206||-||0.327 * 1.0609|
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $748 Mil.|
Revenue was 1014.669 + 1233.065 + 1203.062 + 1130.178 = $4,581 Mil.
Gross Profit was 333.292 + 422.543 + 416.692 + 380.758 = $1,553 Mil.
Total Current Assets was $1,593 Mil.
Total Assets was $4,007 Mil.
Property, Plant and Equipment(Net PPE) was $622 Mil.
Depreciation, Depletion and Amortization(DDA) was $97 Mil.
Selling, General & Admin. Expense(SGA) was $835 Mil.
Total Current Liabilities was $1,336 Mil.
Long-Term Debt was $1,350 Mil.
Net Income was 103.974 + 108.056 + 97.833 + 85.959 = $396 Mil.
Non Operating Income was 0.965 + -0.196 + -1.812 + -0.318 = $-1 Mil.
Cash Flow from Operations was -23.322 + 195.646 + 162.185 + -20.044 = $314 Mil.
|Accounts Receivable was $670 Mil.
Revenue was 979.117 + 1108.302 + 1089.013 + 1031.219 = $4,208 Mil.
Gross Profit was 319.053 + 355.793 + 369.361 + 338.553 = $1,383 Mil.
Total Current Assets was $1,528 Mil.
Total Assets was $3,983 Mil.
Property, Plant and Equipment(Net PPE) was $633 Mil.
Depreciation, Depletion and Amortization(DDA) was $96 Mil.
Selling, General & Admin. Expense(SGA) was $740 Mil.
Total Current Liabilities was $1,504 Mil.
Long-Term Debt was $1,012 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)|
|=||(747.8 / 4580.974)||/||(669.975 / 4207.651)|
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)|
|=||(422.543 / 4207.651)||/||(333.292 / 4580.974)|
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 - (1592.898 + 622.054) / 4006.861)||/||(1 - (1527.85 + 632.912) / 3982.564)|
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))|
|=||(95.732 / (95.732 + 632.912))||/||(96.669 / (96.669 + 622.054))|
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)|
|=||(834.741 / 4580.974)||/||(739.812 / 4207.651)|
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)|
|=||((1350.081 + 1336.352) / 4006.861)||/||((1012.354 + 1504.484) / 3982.564)|
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|
|=||(395.822 - -1.361||-||314.465)||/||4006.861|
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.
Valspar Corp has a M-score of -2.34 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
Valspar Corp Annual Data
Valspar Corp Quarterly Data