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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 * 0.8664||+||0.528 * 1.0029||+||0.404 * 1.0794||+||0.892 * 0.947||+||0.115 * 0.7766|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9286||+||4.679 * -0.0398||-||0.327 * 0.7391|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $2.16 Mil.|
Revenue was 16.3 + 16.18 + 16.948 + 16 = $65.43 Mil.
Gross Profit was 15.712 + 15.483 + 16.35 + 15.288 = $62.83 Mil.
Total Current Assets was $20.80 Mil.
Total Assets was $42.82 Mil.
Property, Plant and Equipment(Net PPE) was $0.94 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.44 Mil.
Selling, General & Admin. Expense(SGA) was $26.45 Mil.
Total Current Liabilities was $7.17 Mil.
Long-Term Debt was $51.42 Mil.
Net Income was 5.394 + 4.563 + 5.654 + 5.34 = $20.95 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil.
Cash Flow from Operations was 2.549 + 10.607 + 4.136 + 5.364 = $22.66 Mil.
|Accounts Receivable was $2.63 Mil.
Revenue was 15.477 + 21.024 + 16.183 + 16.404 = $69.09 Mil.
Gross Profit was 14.831 + 20.326 + 15.719 + 15.662 = $66.54 Mil.
Total Current Assets was $23.34 Mil.
Total Assets was $45.29 Mil.
Property, Plant and Equipment(Net PPE) was $1.29 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.42 Mil.
Selling, General & Admin. Expense(SGA) was $30.08 Mil.
Total Current Liabilities was $11.86 Mil.
Long-Term Debt was $72.00 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)|
|=||(2.158 / 65.428)||/||(2.63 / 69.088)|
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)|
|=||(66.538 / 69.088)||/||(62.833 / 65.428)|
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 - (20.797 + 0.936) / 42.818)||/||(1 - (23.335 + 1.294) / 45.29)|
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))|
|=||(0.424 / (0.424 + 1.294))||/||(0.436 / (0.436 + 0.936))|
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)|
|=||(26.448 / 65.428)||/||(30.075 / 69.088)|
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)|
|=||((51.422 + 7.169) / 42.818)||/||((72 + 11.855) / 45.29)|
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|
|=||(20.951 - 0||-||22.656)||/||42.818|
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 -2.73 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