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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 The Valspar Corp was -1.94. The lowest was -2.89. 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 The 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 * 0.9659||+||0.528 * 0.9408||+||0.404 * 1.0949||+||0.892 * 0.9307||+||0.115 * 1.0571|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0457||+||4.679 * -0.0179||-||0.327 * 1.048|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $672 Mil.|
Revenue was 885.756 + 1149.538 + 1149.126 + 1079.289 = $4,264 Mil.
Gross Profit was 318.627 + 413.611 + 411.283 + 393.203 = $1,537 Mil.
Total Current Assets was $1,502 Mil.
Total Assets was $4,175 Mil.
Property, Plant and Equipment(Net PPE) was $629 Mil.
Depreciation, Depletion and Amortization(DDA) was $92 Mil.
Selling, General & Admin. Expense(SGA) was $812 Mil.
Total Current Liabilities was $1,225 Mil.
Long-Term Debt was $1,708 Mil.
Net Income was 52.431 + 102.356 + 102.862 + 90.314 = $348 Mil.
Non Operating Income was -0.615 + -2.039 + -0.07 + -1.694 = $-4 Mil.
Cash Flow from Operations was 20.489 + 270.604 + 130.283 + 5.635 = $427 Mil.
|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.
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)|
|=||(672.296 / 4263.709)||/||(747.8 / 4580.974)|
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)|
|=||(413.611 / 4580.974)||/||(318.627 / 4263.709)|
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 - (1501.722 + 629.16) / 4175.241)||/||(1 - (1592.898 + 622.054) / 4006.861)|
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))|
|=||(96.669 / (96.669 + 622.054))||/||(91.723 / (91.723 + 629.16))|
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)|
|=||(812.452 / 4263.709)||/||(834.741 / 4580.974)|
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)|
|=||((1708.431 + 1225.322) / 4175.241)||/||((1350.081 + 1336.352) / 4006.861)|
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|
|=||(347.963 - -4.418||-||427.011)||/||4175.241|
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.
The Valspar Corp has a M-score of -2.67 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
The Valspar Corp Annual Data
The Valspar Corp Quarterly Data