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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 Weight Watchers International Inc was -1.89. The lowest was -3.27. And the median was -2.84.
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 Weight Watchers International 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 * 0.9683||+||0.528 * 1.0094||+||0.404 * 1.0882||+||0.892 * 0.9381||+||0.115 * 0.9281|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0156||+||4.679 * -0.0409||-||0.327 * 1.0001|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $26 Mil.|
Revenue was 280.819 + 309.761 + 306.91 + 259.238 = $1,157 Mil.
Gross Profit was 144.303 + 161.048 + 149.673 + 120.798 = $576 Mil.
Total Current Assets was $215 Mil.
Total Assets was $1,261 Mil.
Property, Plant and Equipment(Net PPE) was $52 Mil.
Depreciation, Depletion and Amortization(DDA) was $52 Mil.
Selling, General & Admin. Expense(SGA) was $405 Mil.
Total Current Liabilities was $314 Mil.
Long-Term Debt was $1,985 Mil.
Net Income was 34.658 + 30.494 + -10.753 + -11.289 = $43 Mil.
Non Operating Income was 0.146 + -0.607 + 0.065 + -0.735 = $-1 Mil.
Cash Flow from Operations was 47.551 + 3.033 + 43.333 + 1.947 = $96 Mil.
|Accounts Receivable was $28 Mil.
Revenue was 273.324 + 309.754 + 322.103 + 327.827 = $1,233 Mil.
Gross Profit was 136.622 + 159.364 + 157.303 + 166.27 = $620 Mil.
Total Current Assets was $322 Mil.
Total Assets was $1,395 Mil.
Property, Plant and Equipment(Net PPE) was $62 Mil.
Depreciation, Depletion and Amortization(DDA) was $54 Mil.
Selling, General & Admin. Expense(SGA) was $426 Mil.
Total Current Liabilities was $516 Mil.
Long-Term Debt was $2,027 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)|
|=||(25.867 / 1156.728)||/||(28.475 / 1233.008)|
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)|
|=||(619.559 / 1233.008)||/||(575.822 / 1156.728)|
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 - (215.082 + 51.771) / 1261.418)||/||(1 - (322.089 + 62.229) / 1395.152)|
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))|
|=||(53.691 / (53.691 + 62.229))||/||(51.571 / (51.571 + 51.771))|
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)|
|=||(405.416 / 1156.728)||/||(425.524 / 1233.008)|
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)|
|=||((1985.092 + 313.693) / 1261.418)||/||((2026.5 + 515.727) / 1395.152)|
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|
|=||(43.11 - -1.131||-||95.864)||/||1261.418|
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.
Weight Watchers International Inc 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
Weight Watchers International Inc Annual Data
Weight Watchers International Inc Quarterly Data