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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.
Zale Corp has a M-score of -2.63 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Zale Corp was -1.97. The lowest was -3.53. And the median was -2.60.
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 Zale Corp 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||+||0.528 * 0.9713||+||0.404 * 0.9889||+||0.892 * 0.9992||+||0.115 * 1.0189|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.016||+||4.679 * -0.0283||-||0.327 * 0.9776|
|This Year (Jan14) TTM:||Last Year (Jan13) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 656.449 + 362.615 + 417.089 + 442.708 = $1,879 Mil.
Gross Profit was 347.619 + 193.788 + 221.582 + 232.847 = $996 Mil.
Total Current Assets was $936 Mil.
Total Assets was $1,281 Mil.
Property, Plant and Equipment(Net PPE) was $104 Mil.
Depreciation, Depletion and Amortization(DDA) was $31 Mil.
Selling, General & Admin. Expense(SGA) was $919 Mil.
Total Current Liabilities was $466 Mil.
Long-Term Debt was $445 Mil.
Net Income was 50.786 + -27.306 + -7.984 + 5.052 = $21 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 80.563 + -86.945 + 47.481 + 15.697 = $57 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 670.752 + 357.468 + 406.963 + 445.17 = $1,880 Mil.
Gross Profit was 339.651 + 190.335 + 209.885 + 228.193 = $968 Mil.
Total Current Assets was $901 Mil.
Total Assets was $1,257 Mil.
Property, Plant and Equipment(Net PPE) was $117 Mil.
Depreciation, Depletion and Amortization(DDA) was $36 Mil.
Selling, General & Admin. Expense(SGA) was $906 Mil.
Total Current Liabilities was $441 Mil.
Long-Term Debt was $474 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)|
|=||(0 / 1878.861)||/||(0 / 1880.353)|
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)|
|=||(193.788 / 1880.353)||/||(347.619 / 1878.861)|
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 - (935.786 + 103.714) / 1280.704)||/||(1 - (901.289 + 116.56) / 1257.296)|
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))|
|=||(36.182 / (36.182 + 116.56))||/||(31.415 / (31.415 + 103.714))|
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)|
|=||(919.495 / 1878.861)||/||(905.721 / 1880.353)|
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)|
|=||((445.267 + 466.053) / 1280.704)||/||((473.975 + 441.215) / 1257.296)|
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|
|=||(20.548 - 0||-||56.796)||/||1280.704|
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.
Zale Corp has a M-score of -2.63 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
Zale Corp Annual Data
Zale Corp Quarterly Data