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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 -1.97. The lowest was -3.24. And the median was -2.79.
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 * 1.0272||+||0.528 * 1.0707||+||0.404 * 0.936||+||0.892 * 0.8584||+||0.115 * 0.8563|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0873||+||4.679 * -0.0926||-||0.327 * 0.9324|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $32 Mil.|
Revenue was 327.827 + 345.184 + 397.547 + 409.358 = $1,480 Mil.
Gross Profit was 166.27 + 187.567 + 225.814 + 222.9 = $803 Mil.
Total Current Assets was $428 Mil.
Total Assets was $1,515 Mil.
Property, Plant and Equipment(Net PPE) was $75 Mil.
Depreciation, Depletion and Amortization(DDA) was $49 Mil.
Selling, General & Admin. Expense(SGA) was $503 Mil.
Total Current Liabilities was $377 Mil.
Long-Term Debt was $2,334 Mil.
Net Income was -14.778 + 37.892 + 54.002 + 21.531 = $99 Mil.
Non Operating Income was -0.527 + -1.52 + -0.889 + 10.27 = $7 Mil.
Cash Flow from Operations was 10.328 + 75.792 + 64.649 + 80.85 = $232 Mil.
|Accounts Receivable was $36 Mil.
Revenue was 366.111 + 396.334 + 470.888 + 490.79 = $1,724 Mil.
Gross Profit was 201.78 + 231.98 + 283.715 + 283.637 = $1,001 Mil.
Total Current Assets was $316 Mil.
Total Assets was $1,409 Mil.
Property, Plant and Equipment(Net PPE) was $87 Mil.
Depreciation, Depletion and Amortization(DDA) was $45 Mil.
Selling, General & Admin. Expense(SGA) was $539 Mil.
Total Current Liabilities was $346 Mil.
Long-Term Debt was $2,358 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)|
|=||(31.96 / 1479.916)||/||(36.248 / 1724.123)|
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)|
|=||(187.567 / 1724.123)||/||(166.27 / 1479.916)|
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 - (427.728 + 74.65) / 1515.187)||/||(1 - (315.725 + 87.052) / 1408.931)|
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))|
|=||(44.904 / (44.904 + 87.052))||/||(49.234 / (49.234 + 74.65))|
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)|
|=||(503.237 / 1479.916)||/||(539.189 / 1724.123)|
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)|
|=||((2334 + 377.03) / 1515.187)||/||((2358 + 345.82) / 1408.931)|
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|
|=||(98.647 - 7.334||-||231.619)||/||1515.187|
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 -3.01 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