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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 -5.19. And the median was -2.80.
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 * 0.911||+||0.528 * 0.994||+||0.404 * 1.1487||+||0.892 * 1.0978||+||0.115 * 1.0591|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9949||+||4.679 * 0.0381||-||0.327 * 2.6766|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $0.02 Mil.|
Revenue was 16.183 + 16.404 + 14.039 + 14.553 = $61.18 Mil.
Gross Profit was 15.719 + 15.662 + 13.261 + 13.491 = $58.13 Mil.
Total Current Assets was $28.44 Mil.
Total Assets was $54.73 Mil.
Property, Plant and Equipment(Net PPE) was $1.42 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.41 Mil.
Selling, General & Admin. Expense(SGA) was $25.01 Mil.
Total Current Liabilities was $29.00 Mil.
Long-Term Debt was $0.03 Mil.
Net Income was 5.611 + 5.623 + 4.281 + 4.552 = $20.07 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil.
Cash Flow from Operations was 2.557 + 7.83 + 0.599 + 6.997 = $17.98 Mil.
|Accounts Receivable was $0.02 Mil.
Revenue was 13.767 + 14.792 + 14.024 + 13.148 = $55.73 Mil.
Gross Profit was 13.296 + 14.223 + 12.889 + 12.228 = $52.64 Mil.
Total Current Assets was $30.68 Mil.
Total Assets was $53.04 Mil.
Property, Plant and Equipment(Net PPE) was $1.38 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.43 Mil.
Selling, General & Admin. Expense(SGA) was $22.90 Mil.
Total Current Liabilities was $10.51 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)|
|=||(0.018 / 61.179)||/||(0.018 / 55.731)|
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)|
|=||(15.662 / 55.731)||/||(15.719 / 61.179)|
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 - (28.441 + 1.42) / 54.728)||/||(1 - (30.675 + 1.382) / 53.036)|
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))|
|=||(0.431 / (0.431 + 1.382))||/||(0.411 / (0.411 + 1.42))|
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)|
|=||(25.011 / 61.179)||/||(22.9 / 55.731)|
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)|
|=||((0.026 + 28.997) / 54.728)||/||((0 + 10.508) / 53.036)|
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|
|=||(20.067 - 0||-||17.983)||/||54.728|
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 -2.78 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