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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.
Wendy's Co has a M-score of -2.67 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Wendy's Co was 6.96. The lowest was -6.18. And the median was -2.55.
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 * 1.2104||+||0.528 * 0.8926||+||0.404 * 1.0304||+||0.892 * 0.9045||+||0.115 * 0.9072|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1399||+||4.679 * -0.0451||-||0.327 * 1.0267|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $72 Mil.|
Revenue was 523.427 + 523.196 + 592.405 + 640.779 = $2,280 Mil.
Gross Profit was 175.647 + 149.006 + 155.968 + 171.602 = $652 Mil.
Total Current Assets was $673 Mil.
Total Assets was $4,157 Mil.
Property, Plant and Equipment(Net PPE) was $1,188 Mil.
Depreciation, Depletion and Amortization(DDA) was $191 Mil.
Selling, General & Admin. Expense(SGA) was $291 Mil.
Total Current Liabilities was $321 Mil.
Long-Term Debt was $1,416 Mil.
Net Income was 29.007 + 46.303 + 33.069 + -1.939 = $106 Mil.
Non Operating Income was 0.857 + 0.523 + 22.791 + 2.273 = $26 Mil.
Cash Flow from Operations was 66.268 + 14.741 + 77.156 + 109.327 = $267 Mil.
|Accounts Receivable was $66 Mil.
Revenue was 650.544 + 603.682 + 629.879 + 636.308 = $2,520 Mil.
Gross Profit was 177.246 + 142.854 + 165.603 + 157.883 = $644 Mil.
Total Current Assets was $776 Mil.
Total Assets was $4,317 Mil.
Property, Plant and Equipment(Net PPE) was $1,227 Mil.
Depreciation, Depletion and Amortization(DDA) was $176 Mil.
Selling, General & Admin. Expense(SGA) was $282 Mil.
Total Current Liabilities was $535 Mil.
Long-Term Debt was $1,222 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)|
|=||(72.055 / 2279.807)||/||(65.81 / 2520.413)|
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)|
|=||(149.006 / 2520.413)||/||(175.647 / 2279.807)|
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 - (672.934 + 1187.648) / 4157.055)||/||(1 - (775.795 + 1226.532) / 4316.695)|
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))|
|=||(176.086 / (176.086 + 1226.532))||/||(190.74 / (190.74 + 1187.648))|
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)|
|=||(291.035 / 2279.807)||/||(282.264 / 2520.413)|
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)|
|=||((1416.411 + 321.01) / 4157.055)||/||((1222.285 + 535.018) / 4316.695)|
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|
|=||(106.44 - 26.444||-||267.492)||/||4157.055|
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 -2.67 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
Wendy's Co Annual Data
Wendy's Co Quarterly Data