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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 -3.24. And the median was -2.85.
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 * 0.9104||+||0.528 * 1.0818||+||0.404 * 1.0236||+||0.892 * 0.8478||+||0.115 * 0.8796|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0383||+||4.679 * -0.0372||-||0.327 * 0.9851|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $31 Mil.|
Revenue was 322.103 + 327.827 + 345.184 + 397.547 = $1,393 Mil.
Gross Profit was 157.303 + 166.27 + 187.567 + 225.814 = $737 Mil.
Total Current Assets was $345 Mil.
Total Assets was $1,446 Mil.
Property, Plant and Equipment(Net PPE) was $72 Mil.
Depreciation, Depletion and Amortization(DDA) was $52 Mil.
Selling, General & Admin. Expense(SGA) was $471 Mil.
Total Current Liabilities was $606 Mil.
Long-Term Debt was $2,037 Mil.
Net Income was -5.433 + 4.362 + 37.892 + 54.002 = $91 Mil.
Non Operating Income was 4.201 + -0.527 + -1.52 + -0.889 = $1 Mil.
Cash Flow from Operations was -7.433 + 10.328 + 75.792 + 64.649 = $143 Mil.
|Accounts Receivable was $40 Mil.
Revenue was 409.358 + 366.111 + 396.334 + 470.888 = $1,643 Mil.
Gross Profit was 222.9 + 201.78 + 231.98 + 283.715 = $940 Mil.
Total Current Assets was $368 Mil.
Total Assets was $1,483 Mil.
Property, Plant and Equipment(Net PPE) was $84 Mil.
Depreciation, Depletion and Amortization(DDA) was $49 Mil.
Selling, General & Admin. Expense(SGA) was $535 Mil.
Total Current Liabilities was $399 Mil.
Long-Term Debt was $2,352 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)|
|=||(31.215 / 1392.661)||/||(40.443 / 1642.691)|
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)|
|=||(166.27 / 1642.691)||/||(157.303 / 1392.661)|
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 - (345.232 + 72.106) / 1446.421)||/||(1 - (368.024 + 84.176) / 1483.065)|
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))|
|=||(48.877 / (48.877 + 84.176))||/||(51.713 / (51.713 + 72.106))|
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)|
|=||(470.649 / 1392.661)||/||(534.689 / 1642.691)|
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)|
|=||((2037 + 606.163) / 1446.421)||/||((2352 + 398.989) / 1483.065)|
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|
|=||(90.823 - 1.265||-||143.336)||/||1446.421|
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 -2.84 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