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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 -2.90. 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 * 0.9891||+||0.528 * 0.9604||+||0.404 * 1.0285||+||0.892 * 1.0178||+||0.115 * 1.3155|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.999||+||4.679 * 0.0499||-||0.327 * 1.1055|
|This Year (Jul15) TTM:||Last Year (Jul14) TTM:|
|Accounts Receivable was $877 Mil.|
Revenue was 1149.126 + 1079.289 + 1014.669 + 1233.065 = $4,476 Mil.
Gross Profit was 411.283 + 393.203 + 333.292 + 422.543 = $1,560 Mil.
Total Current Assets was $1,865 Mil.
Total Assets was $4,578 Mil.
Property, Plant and Equipment(Net PPE) was $631 Mil.
Depreciation, Depletion and Amortization(DDA) was $72 Mil.
Selling, General & Admin. Expense(SGA) was $824 Mil.
Total Current Liabilities was $1,621 Mil.
Long-Term Debt was $1,707 Mil.
Net Income was 102.862 + 90.314 + 103.974 + 108.056 = $405 Mil.
Non Operating Income was -0.07 + -1.694 + 0.965 + -0.196 = $-1 Mil.
Cash Flow from Operations was 0 + 5.635 + -23.322 + 195.646 = $178 Mil.
|Accounts Receivable was $871 Mil.
Revenue was 1203.062 + 1130.178 + 956.119 + 1108.302 = $4,398 Mil.
Gross Profit was 416.692 + 380.758 + 319.053 + 355.793 = $1,472 Mil.
Total Current Assets was $1,688 Mil.
Total Assets was $4,180 Mil.
Property, Plant and Equipment(Net PPE) was $643 Mil.
Depreciation, Depletion and Amortization(DDA) was $100 Mil.
Selling, General & Admin. Expense(SGA) was $811 Mil.
Total Current Liabilities was $1,670 Mil.
Long-Term Debt was $1,078 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)|
|=||(876.8 / 4476.149)||/||(870.954 / 4397.661)|
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)|
|=||(393.203 / 4397.661)||/||(411.283 / 4476.149)|
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 - (1865.045 + 630.814) / 4578.018)||/||(1 - (1688.35 + 643.069) / 4179.798)|
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))|
|=||(100.383 / (100.383 + 643.069))||/||(72.15 / (72.15 + 630.814))|
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)|
|=||(824.371 / 4476.149)||/||(810.761 / 4397.661)|
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)|
|=||((1706.95 + 1620.873) / 4578.018)||/||((1077.921 + 1670.424) / 4179.798)|
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|
|=||(405.206 - -0.995||-||177.959)||/||4578.018|
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 -2.25 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