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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 -5.29. And the median was -2.79.
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 * 1.5646||+||0.528 * 0.9931||+||0.404 * 1.1171||+||0.892 * 0.9587||+||0.115 * 0.7903|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.914||+||4.679 * -0.0709||-||0.327 * 0.6886|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $0.01 Mil.|
Revenue was 17.366 + 16.734 + 16.3 + 16.18 = $66.58 Mil.
Gross Profit was 17.049 + 16.235 + 15.712 + 15.483 = $64.48 Mil.
Total Current Assets was $22.79 Mil.
Total Assets was $48.58 Mil.
Property, Plant and Equipment(Net PPE) was $0.77 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.42 Mil.
Selling, General & Admin. Expense(SGA) was $26.16 Mil.
Total Current Liabilities was $7.36 Mil.
Long-Term Debt was $43.33 Mil.
Net Income was 6.166 + 6.094 + 5.394 + 4.563 = $22.22 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil.
Cash Flow from Operations was 5.726 + 6.78 + 2.549 + 10.607 = $25.66 Mil.
|Accounts Receivable was $0.01 Mil.
Revenue was 16.948 + 16 + 15.477 + 21.024 = $69.45 Mil.
Gross Profit was 16.35 + 15.288 + 14.831 + 20.326 = $66.80 Mil.
Total Current Assets was $24.43 Mil.
Total Assets was $47.41 Mil.
Property, Plant and Equipment(Net PPE) was $1.12 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.43 Mil.
Selling, General & Admin. Expense(SGA) was $29.85 Mil.
Total Current Liabilities was $7.51 Mil.
Long-Term Debt was $64.32 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)|
|=||(0.012 / 66.58)||/||(0.008 / 69.449)|
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)|
|=||(66.795 / 69.449)||/||(64.479 / 66.58)|
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 - (22.794 + 0.77) / 48.582)||/||(1 - (24.431 + 1.122) / 47.406)|
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))|
|=||(0.434 / (0.434 + 1.122))||/||(0.42 / (0.42 + 0.77))|
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)|
|=||(26.16 / 66.58)||/||(29.854 / 69.449)|
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)|
|=||((43.327 + 7.358) / 48.582)||/||((64.317 + 7.511) / 47.406)|
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|
|=||(22.217 - 0||-||25.662)||/||48.582|
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 -2.19 signals that the company is likely to 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