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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 Winmark Corp was 3.59. The lowest was -5.91. And the median was -2.87.
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 Winmark 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 * 1.1854||+||0.528 * 1.0033||+||0.404 * 0.9589||+||0.892 * 0.955||+||0.115 * 0.7848|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9535||+||4.679 * -0.0195||-||0.327 * 4.0946|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $1.35 Mil.|
Revenue was 16.18 + 16.948 + 16 + 15.477 = $64.61 Mil.
Gross Profit was 15.483 + 16.35 + 15.288 + 14.831 = $61.95 Mil.
Total Current Assets was $21.94 Mil.
Total Assets was $43.76 Mil.
Property, Plant and Equipment(Net PPE) was $1.03 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.44 Mil.
Selling, General & Admin. Expense(SGA) was $26.89 Mil.
Total Current Liabilities was $9.95 Mil.
Long-Term Debt was $54.92 Mil.
Net Income was 4.563 + 5.654 + 5.34 + 4.751 = $20.31 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil.
Cash Flow from Operations was 10.607 + 4.136 + 5.364 + 1.053 = $21.16 Mil.
|Accounts Receivable was $1.19 Mil.
Revenue was 21.024 + 16.183 + 16.404 + 14.039 = $67.65 Mil.
Gross Profit was 20.326 + 15.719 + 15.662 + 13.38 = $65.09 Mil.
Total Current Assets was $23.40 Mil.
Total Assets was $49.07 Mil.
Property, Plant and Equipment(Net PPE) was $1.37 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.41 Mil.
Selling, General & Admin. Expense(SGA) was $29.53 Mil.
Total Current Liabilities was $17.77 Mil.
Long-Term Debt was $0.00 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)|
|=||(1.346 / 64.605)||/||(1.189 / 67.65)|
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)|
|=||(16.35 / 67.65)||/||(15.483 / 64.605)|
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 - (21.943 + 1.032) / 43.756)||/||(1 - (23.403 + 1.365) / 49.074)|
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))|
|=||(0.414 / (0.414 + 1.365))||/||(0.435 / (0.435 + 1.032))|
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)|
|=||(26.892 / 64.605)||/||(29.533 / 67.65)|
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)|
|=||((54.919 + 9.946) / 43.756)||/||((0 + 17.767) / 49.074)|
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|
|=||(20.308 - 0||-||21.16)||/||43.756|
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.
Winmark Corp has a M-score of -3.48 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
Winmark Corp Annual Data
Winmark Corp Quarterly Data