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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.
American Capital Ltd has a M-score of -2.79 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of American Capital Ltd was -1.13. The lowest was -6.62. And the median was -2.49.
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 American Capital Ltd 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 * 1.1584||+||0.528 * 1||+||0.404 * 1.0493||+||0.892 * 0.6834||+||0.115 * 1|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.4423||+||4.679 * -0.0078||-||0.327 * 1.2613|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $38.0 Mil.|
Revenue was 100 + 84 + 118 + 106 = $408.0 Mil.
Gross Profit was 100 + 84 + 118 + 106 = $408.0 Mil.
Total Current Assets was $734.0 Mil.
Total Assets was $6,394.0 Mil.
Property, Plant and Equipment(Net PPE) was $0.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $6.0 Mil.
Selling, General & Admin. Expense(SGA) was $207.0 Mil.
Total Current Liabilities was $5.0 Mil.
Long-Term Debt was $786.0 Mil.
Net Income was 212 + 70 + -182 + -1 = $99.0 Mil.
Non Operating Income was 186 + 68 + -311 + 52 = $-5.0 Mil.
Cash Flow from Operations was 39 + 8 + 57 + 50 = $154.0 Mil.
|Accounts Receivable was $48.0 Mil.
Revenue was 130 + 133 + 180 + 154 = $597.0 Mil.
Gross Profit was 130 + 133 + 180 + 154 = $597.0 Mil.
Total Current Assets was $979.0 Mil.
Total Assets was $6,260.0 Mil.
Property, Plant and Equipment(Net PPE) was $0.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.0 Mil.
Selling, General & Admin. Expense(SGA) was $210.0 Mil.
Total Current Liabilities was $161.0 Mil.
Long-Term Debt was $453.0 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(38 / 408)||/||(48 / 597)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(84 / 597)||/||(100 / 408)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (734 + 0) / 6394)||/||(1 - (979 + 0) / 6260)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(7 / (7 + 0))||/||(6 / (6 + 0))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(207 / 408)||/||(210 / 597)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((786 + 5) / 6394)||/||((453 + 161) / 6260)|
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|
|=||(99 - -5||-||154)||/||6394|
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.
American Capital Ltd has a M-score of -2.79 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
American Capital Ltd Annual Data
American Capital Ltd Quarterly Data