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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 Wendy's Co was 6.19. The lowest was -5.71. And the median was -2.50.
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 Wendy's Co 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 * 1.2947||+||0.528 * 0.8626||+||0.404 * 1.0191||+||0.892 * 0.8521||+||0.115 * 1.0664|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1477||+||4.679 * -0.0366||-||0.327 * 1.0124|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $69 Mil.|
Revenue was 512.489 + 523.427 + 523.196 + 592.405 = $2,152 Mil.
Gross Profit was 168.682 + 175.647 + 149.006 + 155.968 = $649 Mil.
Total Current Assets was $670 Mil.
Total Assets was $4,179 Mil.
Property, Plant and Equipment(Net PPE) was $1,235 Mil.
Depreciation, Depletion and Amortization(DDA) was $180 Mil.
Selling, General & Admin. Expense(SGA) was $280 Mil.
Total Current Liabilities was $339 Mil.
Long-Term Debt was $1,409 Mil.
Net Income was 22.83 + 29.007 + 46.303 + 33.069 = $131 Mil.
Non Operating Income was 0.373 + 0.857 + 0.523 + 22.791 = $25 Mil.
Cash Flow from Operations was 101.587 + 66.268 + 14.741 + 77.156 = $260 Mil.
|Accounts Receivable was $63 Mil.
Revenue was 640.779 + 650.544 + 603.682 + 629.879 = $2,525 Mil.
Gross Profit was 171.602 + 177.246 + 142.854 + 165.603 = $657 Mil.
Total Current Assets was $859 Mil.
Total Assets was $4,324 Mil.
Property, Plant and Equipment(Net PPE) was $1,156 Mil.
Depreciation, Depletion and Amortization(DDA) was $181 Mil.
Selling, General & Admin. Expense(SGA) was $287 Mil.
Total Current Liabilities was $353 Mil.
Long-Term Debt was $1,434 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)|
|=||(69.084 / 2151.517)||/||(62.62 / 2524.884)|
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)|
|=||(175.647 / 2524.884)||/||(168.682 / 2151.517)|
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 - (670.233 + 1234.992) / 4179.455)||/||(1 - (858.799 + 1156.32) / 4323.955)|
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))|
|=||(181.041 / (181.041 + 1156.32))||/||(179.56 / (179.56 + 1234.992))|
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)|
|=||(280.291 / 2151.517)||/||(286.607 / 2524.884)|
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)|
|=||((1409.066 + 339.144) / 4179.455)||/||((1433.662 + 352.846) / 4323.955)|
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|
|=||(131.209 - 24.544||-||259.752)||/||4179.455|
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.
Wendy's Co has a M-score of -2.60 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
Wendy's Co Annual Data
Wendy's Co Quarterly Data