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Arch Coal Inc (NYSE:ACI)
Beneish M-Score
-2.85 (As of Today)

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.

Arch Coal Inc has a M-score of -2.85 suggests that the company is not a manipulator.

ACI' s 10-Year Beneish M-Score Range
Min: -3.51   Max: 2.99
Current: -2.85

-3.51
2.99

During the past 13 years, the highest Beneish M-Score of Arch Coal Inc was 2.99. The lowest was -3.51. And the median was -2.73.


Definition

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 Arch Coal 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 * 0.9372+0.528 * 1.4831+0.404 * 0.6919+0.892 * 0.8499+0.115 * 1.0385
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.6642+4.679 * -0.0709-0.327 * 1.1124
=-2.85

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $275 Mil.
Revenue was 735.971 + 719.386 + 791.269 + 766.332 = $3,013 Mil.
Gross Profit was 49.657 + 50.903 + 102.557 + 110.134 = $313 Mil.
Total Current Assets was $1,737 Mil.
Total Assets was $8,823 Mil.
Property, Plant and Equipment(Net PPE) was $6,616 Mil.
Depreciation, Depletion and Amortization(DDA) was $433 Mil.
Selling, General & Admin. Expense(SGA) was $129 Mil.
Total Current Liabilities was $519 Mil.
Long-Term Debt was $5,113 Mil.
Net Income was -124.139 + -371.214 + -128.363 + -72.206 = $-696 Mil.
Non Operating Income was 0 + -42.921 + 0 + 0 = $-43 Mil.
Cash Flow from Operations was -40.275 + -130.85 + 134.547 + 8.754 = $-28 Mil.
Accounts Receivable was $345 Mil.
Revenue was 737.37 + 867.034 + 975.17 + 965.685 = $3,545 Mil.
Gross Profit was 87.627 + 126.241 + 166.681 + 166.127 = $547 Mil.
Total Current Assets was $1,884 Mil.
Total Assets was $9,920 Mil.
Property, Plant and Equipment(Net PPE) was $7,273 Mil.
Depreciation, Depletion and Amortization(DDA) was $496 Mil.
Selling, General & Admin. Expense(SGA) was $229 Mil.
Total Current Liabilities was $610 Mil.
Long-Term Debt was $5,082 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(274.812 / 3012.958) / (345.044 / 3545.259)
=0.09121003 / 0.09732547
=0.9372

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(50.903 / 3545.259) / (49.657 / 3012.958)
=0.15419917 / 0.10396793
=1.4831

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (1737.328 + 6616.144) / 8823.184) / (1 - (1884.382 + 7272.541) / 9920.144)
=0.05323611 / 0.07693648
=0.6919

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=3012.958 / 3545.259
=0.8499

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))
=(495.824 / (495.824 + 7272.541)) / (433.259 / (433.259 + 6616.144))
=0.06382604 / 0.06146038
=1.0385

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)
=(129.375 / 3012.958) / (229.179 / 3545.259)
=0.04293953 / 0.0646438
=0.6642

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)
=((5112.995 + 518.872) / 8823.184) / ((5082.205 + 610.258) / 9920.144)
=0.63830325 / 0.57382867
=1.1124

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-695.922 - -42.921 - -27.824) / 8823.184
=-0.0709

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.

Arch Coal Inc has a M-score of -2.85 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Arch Coal Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.0930.77541.19140.99190.83741.03680.88171.38240.8050.8642
GMI 0.76631.05510.56491.08520.81191.36650.79081.04451.461.3963
AQI 0.64611.06671.10220.95410.84371.13681.05390.61780.71270.698
SGI 1.32861.31540.99670.96531.23620.86341.23691.34510.87920.8
DEPI 1.42210.72731.22330.950.82281.21340.82971.82030.88781.0722
SGAI 0.89981.39940.43841.16041.02611.05730.97710.7491.2831.2421
LVGI 1.03331.15140.96740.97030.96751.15770.96111.04111.10531.1019
TATA -0.0604-0.1092-0.0209-0.0427-0.0816-0.0704-0.1089-0.0488-0.0992-0.0728
M-score -2.60-3.01-2.46-2.72-2.98-2.69-2.98-2.06-3.20-3.10

Arch Coal Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.89650.7510.75650.78841.19811.12160.82010.88240.93720.8032
GMI 1.14311.30031.27421.41071.43831.35941.41691.44511.48311.4729
AQI 0.62930.97260.93460.71270.71540.77030.76650.6980.69190.7113
SGI 1.33021.24221.08140.89770.79620.75480.75120.78350.84990.8848
DEPI 1.55140.62030.67540.88781.04911.16961.11581.07221.03851.0693
SGAI 0.80940.96611.17472.12232.4092.40772.02480.75090.66420.6188
LVGI 1.22931.18561.23141.10531.12961.01541.03941.10191.11241.1153
TATA -0.0513-0.081-0.0881-0.0992-0.1061-0.0696-0.076-0.0728-0.0709-0.0697
M-score -2.57-2.82-3.07-3.37-3.14-3.04-3.27-2.99-2.85-2.92
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