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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 Arch Coal Inc was 3.02. The lowest was -4.70. And the median was -2.76.
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 * 1.0779||+||0.528 * 0.5714||+||0.404 * 1.1371||+||0.892 * 0.9464||+||0.115 * 0.6573|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8466||+||4.679 * -0.4094||-||0.327 * 1.4559|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $218 Mil.|
Revenue was 688.544 + 644.462 + 677.005 + 745.192 = $2,755 Mil.
Gross Profit was 148.352 + 78.21 + 114.683 + 134.546 = $476 Mil.
Total Current Assets was $1,319 Mil.
Total Assets was $5,848 Mil.
Property, Plant and Equipment(Net PPE) was $4,173 Mil.
Depreciation, Depletion and Amortization(DDA) was $413 Mil.
Selling, General & Admin. Expense(SGA) was $100 Mil.
Total Current Liabilities was $495 Mil.
Long-Term Debt was $5,108 Mil.
Net Income was -1999.476 + -168.103 + -113.195 + -240.136 = $-2,521 Mil.
Non Operating Income was -7.482 + -4.016 + 0 + 0 = $-11 Mil.
Cash Flow from Operations was 45.893 + -121.302 + -4.273 + -35.572 = $-115 Mil.
|Accounts Receivable was $213 Mil.
Revenue was 742.18 + 713.776 + 735.971 + 719.386 = $2,911 Mil.
Gross Profit was 95.084 + 91.639 + 49.657 + 50.903 = $287 Mil.
Total Current Assets was $1,626 Mil.
Total Assets was $8,619 Mil.
Property, Plant and Equipment(Net PPE) was $6,532 Mil.
Depreciation, Depletion and Amortization(DDA) was $411 Mil.
Selling, General & Admin. Expense(SGA) was $124 Mil.
Total Current Liabilities was $547 Mil.
Long-Term Debt was $5,126 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)|
|=||(217.667 / 2755.203)||/||(213.369 / 2911.313)|
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)|
|=||(78.21 / 2911.313)||/||(148.352 / 2755.203)|
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 - (1319.319 + 4173.038) / 5847.997)||/||(1 - (1625.717 + 6532.118) / 8618.782)|
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))|
|=||(410.883 / (410.883 + 6532.118))||/||(412.917 / (412.917 + 4173.038))|
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)|
|=||(99.624 / 2755.203)||/||(124.34 / 2911.313)|
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)|
|=||((5108.492 + 495.213) / 5847.997)||/||((5126.186 + 546.521) / 8618.782)|
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|
|=||(-2520.91 - -11.498||-||-115.254)||/||5847.997|
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 -4.70 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
Arch Coal Inc Annual Data
Arch Coal Inc Quarterly Data