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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 Wal-Mart Stores Inc was -1.84. The lowest was -3.32. And the median was -2.65.
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 Wal-Mart Stores Inc 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 * 0.8492||+||0.528 * 0.9971||+||0.404 * 0.9681||+||0.892 * 1.0107||+||0.115 * 0.9524|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0135||+||4.679 * -0.0568||-||0.327 * 0.9847|
|This Year (Jul15) TTM:||Last Year (Jul14) TTM:|
|Accounts Receivable was $5,275 Mil.|
Revenue was 120229 + 114826 + 131565 + 119001 = $485,621 Mil.
Gross Profit was 30173 + 28343 + 32450 + 29754 = $120,720 Mil.
Total Current Assets was $58,132 Mil.
Total Assets was $198,620 Mil.
Property, Plant and Equipment(Net PPE) was $116,511 Mil.
Depreciation, Depletion and Amortization(DDA) was $9,304 Mil.
Selling, General & Admin. Expense(SGA) was $94,757 Mil.
Total Current Liabilities was $65,262 Mil.
Long-Term Debt was $42,843 Mil.
Net Income was 3475 + 3341 + 4966 + 3711 = $15,493 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 5656 + 4446 + 13094 + 3570 = $26,766 Mil.
|Accounts Receivable was $6,146 Mil.
Revenue was 120125 + 114960 + 129706 + 115688 = $480,479 Mil.
Gross Profit was 30115 + 28246 + 31735 + 29001 = $119,097 Mil.
Total Current Assets was $59,632 Mil.
Total Assets was $203,762 Mil.
Property, Plant and Equipment(Net PPE) was $118,723 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,995 Mil.
Selling, General & Admin. Expense(SGA) was $92,507 Mil.
Total Current Liabilities was $67,132 Mil.
Long-Term Debt was $45,496 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)|
|=||(5275 / 485621)||/||(6146 / 480479)|
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)|
|=||(28343 / 480479)||/||(30173 / 485621)|
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 - (58132 + 116511) / 198620)||/||(1 - (59632 + 118723) / 203762)|
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))|
|=||(8995 / (8995 + 118723))||/||(9304 / (9304 + 116511))|
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)|
|=||(94757 / 485621)||/||(92507 / 480479)|
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)|
|=||((42843 + 65262) / 198620)||/||((45496 + 67132) / 203762)|
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|
|=||(15493 - 0||-||26766)||/||198620|
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.
Wal-Mart Stores Inc has a M-score of -2.89 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
Wal-Mart Stores Inc Annual Data
Wal-Mart Stores Inc Quarterly Data