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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 * 1.3463||+||0.528 * 0.8128||+||0.404 * 1.0697||+||0.892 * 0.8286||+||0.115 * 1.3124|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0814||+||4.679 * -0.0326||-||0.327 * 1.0285|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $69 Mil.|
Revenue was 501.951 + 512.489 + 523.427 + 523.196 = $2,061 Mil.
Gross Profit was 166.932 + 168.682 + 175.647 + 149.006 = $660 Mil.
Total Current Assets was $562 Mil.
Total Assets was $4,146 Mil.
Property, Plant and Equipment(Net PPE) was $1,271 Mil.
Depreciation, Depletion and Amortization(DDA) was $160 Mil.
Selling, General & Admin. Expense(SGA) was $263 Mil.
Total Current Liabilities was $340 Mil.
Long-Term Debt was $1,394 Mil.
Net Income was 23.294 + 22.83 + 29.007 + 46.303 = $121 Mil.
Non Operating Income was 0.2 + 0.373 + 0.857 + 0.523 = $2 Mil.
Cash Flow from Operations was 72.18 + 101.587 + 66.268 + 14.741 = $255 Mil.
|Accounts Receivable was $62 Mil.
Revenue was 592.405 + 640.779 + 650.544 + 603.682 = $2,487 Mil.
Gross Profit was 155.968 + 171.602 + 177.246 + 142.854 = $648 Mil.
Total Current Assets was $922 Mil.
Total Assets was $4,363 Mil.
Property, Plant and Equipment(Net PPE) was $1,165 Mil.
Depreciation, Depletion and Amortization(DDA) was $200 Mil.
Selling, General & Admin. Expense(SGA) was $294 Mil.
Total Current Liabilities was $350 Mil.
Long-Term Debt was $1,425 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)|
|=||(69.187 / 2061.063)||/||(62.021 / 2487.41)|
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)|
|=||(168.682 / 2487.41)||/||(166.932 / 2061.063)|
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 - (562.102 + 1271.238) / 4145.842)||/||(1 - (922.411 + 1165.487) / 4363.04)|
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))|
|=||(200.219 / (200.219 + 1165.487))||/||(159.86 / (159.86 + 1271.238))|
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)|
|=||(263.257 / 2061.063)||/||(293.792 / 2487.41)|
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)|
|=||((1394.366 + 340.224) / 4145.842)||/||((1425.285 + 349.526) / 4363.04)|
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|
|=||(121.434 - 1.953||-||254.776)||/||4145.842|
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 -2.52 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