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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 -1.67. The lowest was -4.83. And the median was -2.72.
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 * 0.6791||+||0.528 * 1.2404||+||0.404 * 0.6709||+||0.892 * 1.6815||+||0.115 * 0.964|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7522||+||4.679 * 0.0885||-||0.327 * 2.5185|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $370 Mil.|
Revenue was 1886 + 3316 + 3008 + 2619 = $10,829 Mil.
Gross Profit was 816 + 998 + 812 + 839 = $3,465 Mil.
Total Current Assets was $1,482 Mil.
Total Assets was $5,478 Mil.
Property, Plant and Equipment(Net PPE) was $2,160 Mil.
Depreciation, Depletion and Amortization(DDA) was $309 Mil.
Selling, General & Admin. Expense(SGA) was $1,390 Mil.
Total Current Liabilities was $1,369 Mil.
Long-Term Debt was $9,061 Mil.
Net Income was 303 + 622 + 339 + 391 = $1,655 Mil.
Non Operating Income was -34 + 0 + 0 + 0 = $-34 Mil.
Cash Flow from Operations was -338 + 646 + 237 + 659 = $1,204 Mil.
|Accounts Receivable was $324 Mil.
Revenue was -2714 + 3427 + 3105 + 2622 = $6,440 Mil.
Gross Profit was 22 + 933 + 810 + 791 = $2,556 Mil.
Total Current Assets was $1,687 Mil.
Total Assets was $8,061 Mil.
Property, Plant and Equipment(Net PPE) was $2,347 Mil.
Depreciation, Depletion and Amortization(DDA) was $322 Mil.
Selling, General & Admin. Expense(SGA) was $1,099 Mil.
Total Current Liabilities was $3,087 Mil.
Long-Term Debt was $3,007 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)|
|=||(370 / 10829)||/||(324 / 6440)|
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)|
|=||(2556 / 6440)||/||(3465 / 10829)|
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 - (1482 + 2160) / 5478)||/||(1 - (1687 + 2347) / 8061)|
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))|
|=||(322 / (322 + 2347))||/||(309 / (309 + 2160))|
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)|
|=||(1390 / 10829)||/||(1099 / 6440)|
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)|
|=||((9061 + 1369) / 5478)||/||((3007 + 3087) / 8061)|
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|
|=||(1655 - -34||-||1204)||/||5478|
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 -2.22 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