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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 -3.13. And the median was -2.62.
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 * 1.065||+||0.528 * 0.9757||+||0.404 * 1.2191||+||0.892 * 1.0012||+||0.115 * 0.9397|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.055||+||4.679 * -0.0849||-||0.327 * 1.0051|
|This Year (Oct16) TTM:||Last Year (Oct15) TTM:|
|Accounts Receivable was $5,344 Mil.|
Revenue was 118179 + 120854 + 115904 + 129667 = $484,604 Mil.
Gross Profit was 30695 + 31369 + 29360 + 32668 = $124,092 Mil.
Total Current Assets was $63,401 Mil.
Total Assets was $206,857 Mil.
Property, Plant and Equipment(Net PPE) was $115,088 Mil.
Depreciation, Depletion and Amortization(DDA) was $9,805 Mil.
Selling, General & Admin. Expense(SGA) was $100,891 Mil.
Total Current Liabilities was $74,130 Mil.
Long-Term Debt was $42,108 Mil.
Net Income was 3034 + 3773 + 3079 + 4574 = $14,460 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 4713 + 8738 + 6193 + 12384 = $32,028 Mil.
|Accounts Receivable was $5,012 Mil.
Revenue was 117408 + 120229 + 114826 + 131565 = $484,028 Mil.
Gross Profit was 29962 + 30173 + 28343 + 32450 = $120,928 Mil.
Total Current Assets was $65,112 Mil.
Total Assets was $205,144 Mil.
Property, Plant and Equipment(Net PPE) was $116,956 Mil.
Depreciation, Depletion and Amortization(DDA) was $9,315 Mil.
Selling, General & Admin. Expense(SGA) was $95,516 Mil.
Total Current Liabilities was $70,492 Mil.
Long-Term Debt was $44,198 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)|
|=||(5344 / 484604)||/||(5012 / 484028)|
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)|
|=||(120928 / 484028)||/||(124092 / 484604)|
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 - (63401 + 115088) / 206857)||/||(1 - (65112 + 116956) / 205144)|
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))|
|=||(9315 / (9315 + 116956))||/||(9805 / (9805 + 115088))|
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)|
|=||(100891 / 484604)||/||(95516 / 484028)|
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)|
|=||((42108 + 74130) / 206857)||/||((44198 + 70492) / 205144)|
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|
|=||(14460 - 0||-||32028)||/||206857|
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 -2.76 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