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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 -2.07. The lowest was -3.09. And the median was -2.68.
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 * 0.9961||+||0.528 * 1.0007||+||0.404 * 0.9313||+||0.892 * 1.0191||+||0.115 * 0.9597|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.002||+||4.679 * -0.0599||-||0.327 * 0.9615|
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $6,778 Mil.|
Revenue was 131565 + 119001 + 120125 + 114960 = $485,651 Mil.
Gross Profit was 32450 + 29754 + 30115 + 28246 = $120,565 Mil.
Total Current Assets was $63,278 Mil.
Total Assets was $203,706 Mil.
Property, Plant and Equipment(Net PPE) was $116,655 Mil.
Depreciation, Depletion and Amortization(DDA) was $9,173 Mil.
Selling, General & Admin. Expense(SGA) was $93,418 Mil.
Total Current Liabilities was $65,272 Mil.
Long-Term Debt was $43,692 Mil.
Net Income was 4966 + 3711 + 4093 + 3593 = $16,363 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 13094 + 3570 + 5961 + 5939 = $28,564 Mil.
|Accounts Receivable was $6,677 Mil.
Revenue was 129706 + 115688 + 116945 + 114187 = $476,526 Mil.
Gross Profit was 31735 + 29001 + 29490 + 28160 = $118,386 Mil.
Total Current Assets was $61,185 Mil.
Total Assets was $204,751 Mil.
Property, Plant and Equipment(Net PPE) was $117,907 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,870 Mil.
Selling, General & Admin. Expense(SGA) was $91,480 Mil.
Total Current Liabilities was $69,345 Mil.
Long-Term Debt was $44,559 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)|
|=||(6778 / 485651)||/||(6677 / 476526)|
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)|
|=||(29754 / 476526)||/||(32450 / 485651)|
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 - (63278 + 116655) / 203706)||/||(1 - (61185 + 117907) / 204751)|
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))|
|=||(8870 / (8870 + 117907))||/||(9173 / (9173 + 116655))|
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)|
|=||(93418 / 485651)||/||(91480 / 476526)|
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)|
|=||((43692 + 65272) / 203706)||/||((44559 + 69345) / 204751)|
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|
|=||(16363 - 0||-||28564)||/||203706|
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 -2.77 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