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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 Yum Brands Inc was 0.39. The lowest was -4.86. And the median was -2.77.
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 Yum Brands 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 * 1.5845||+||0.528 * 0.935||+||0.404 * 0.9695||+||0.892 * 0.6894||+||0.115 * 1.3323|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9978||+||4.679 * -0.0962||-||0.327 * 0.969|
|This Year (Sep15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $355 Mil.|
Revenue was 3427 + 0 + 3105 + 2622 = $9,154 Mil.
Gross Profit was 933 + 0 + 810 + 791 = $2,534 Mil.
Total Current Assets was $1,919 Mil.
Total Assets was $8,306 Mil.
Property, Plant and Equipment(Net PPE) was $4,263 Mil.
Depreciation, Depletion and Amortization(DDA) was $505 Mil.
Selling, General & Admin. Expense(SGA) was $976 Mil.
Total Current Liabilities was $2,642 Mil.
Long-Term Debt was $2,651 Mil.
Net Income was 421 + 0 + 235 + 362 = $1,018 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 870 + 0 + 431 + 516 = $1,817 Mil.
|Accounts Receivable was $325 Mil.
Revenue was 3997 + 3354 + 3204 + 2724 = $13,279 Mil.
Gross Profit was 907 + 850 + 840 + 840 = $3,437 Mil.
Total Current Assets was $1,646 Mil.
Total Assets was $8,345 Mil.
Property, Plant and Equipment(Net PPE) was $4,498 Mil.
Depreciation, Depletion and Amortization(DDA) was $739 Mil.
Selling, General & Admin. Expense(SGA) was $1,419 Mil.
Total Current Liabilities was $2,411 Mil.
Long-Term Debt was $3,077 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)|
|=||(355 / 9154)||/||(325 / 13279)|
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)|
|=||(0 / 13279)||/||(933 / 9154)|
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 - (1919 + 4263) / 8306)||/||(1 - (1646 + 4498) / 8345)|
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))|
|=||(739 / (739 + 4498))||/||(505 / (505 + 4263))|
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)|
|=||(976 / 9154)||/||(1419 / 13279)|
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)|
|=||((2651 + 2642) / 8306)||/||((3077 + 2411) / 8345)|
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|
|=||(1018 - 0||-||1817)||/||8306|
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.
Yum Brands Inc has a M-score of -2.67 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
Yum Brands Inc Annual Data
Yum Brands Inc Quarterly Data