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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 16.36. The lowest was -5.87. And the median was -2.94.
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 * 0.9546||+||0.528 * 0.9934||+||0.404 * 0.9904||+||0.892 * 1.184||+||0.115 * 1.0052|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0626||+||4.679 * -0.0237||-||0.327 * 0.6388|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|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 + 13.261 = $64.97 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 $29.41 Mil.
Total Current Liabilities was $17.77 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was 6.054 + 5.611 + 5.623 + 4.281 = $21.57 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil.
Cash Flow from Operations was 11.748 + 2.557 + 7.83 + 0.599 = $22.73 Mil.
|Accounts Receivable was $1.05 Mil.
Revenue was 14.553 + 13.767 + 14.792 + 14.024 = $57.14 Mil.
Gross Profit was 13.491 + 13.296 + 14.223 + 13.499 = $54.51 Mil.
Total Current Assets was $22.10 Mil.
Total Assets was $47.03 Mil.
Property, Plant and Equipment(Net PPE) was $1.41 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.43 Mil.
Selling, General & Admin. Expense(SGA) was $23.38 Mil.
Total Current Liabilities was $26.45 Mil.
Long-Term Debt was $0.20 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)|
|=||(1.189 / 67.65)||/||(1.052 / 57.136)|
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)|
|=||(15.719 / 57.136)||/||(20.326 / 67.65)|
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 - (23.403 + 1.365) / 49.074)||/||(1 - (22.104 + 1.405) / 47.029)|
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))|
|=||(0.429 / (0.429 + 1.405))||/||(0.414 / (0.414 + 1.365))|
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)|
|=||(29.414 / 67.65)||/||(23.38 / 57.136)|
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)|
|=||((0 + 17.767) / 49.074)||/||((0.204 + 26.448) / 47.029)|
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|
|=||(21.569 - 0||-||22.734)||/||49.074|
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 -2.37 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