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Arch Coal Inc (NYSE:ACI)
Beneish M-Score
-3.02 (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 -3.02 suggests that the company is not a manipulator.

ACI' s 10-Year Beneish M-Score Range
Min: -3.51   Max: -1.87
Current: -3.02

-3.51
-1.87

During the past 13 years, the highest Beneish M-Score of Arch Coal Inc was -1.87. The lowest was -3.51. And the median was -2.81.


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 * 0.8573+0.528 * 1.3801+0.404 * 0.698+0.892 * 0.8064+0.115 * 1.0722
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7296+4.679 * -0.0728-0.327 * 1.1019
=-3.02

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $230 Mil.
Revenue was 719.386 + 791.269 + 766.332 + 825.502 = $3,102 Mil.
Gross Profit was 50.903 + 102.557 + 110.134 + 114.929 = $379 Mil.
Total Current Assets was $1,782 Mil.
Total Assets was $8,990 Mil.
Property, Plant and Equipment(Net PPE) was $6,734 Mil.
Depreciation, Depletion and Amortization(DDA) was $448 Mil.
Selling, General & Admin. Expense(SGA) was $133 Mil.
Total Current Liabilities was $488 Mil.
Long-Term Debt was $5,118 Mil.
Net Income was -371.214 + -128.363 + -72.206 + -70.049 = $-642 Mil.
Non Operating Income was -42.921 + 0 + 0 + 0 = $-43 Mil.
Cash Flow from Operations was -130.85 + 134.547 + 8.754 + 43.291 = $56 Mil.
Accounts Receivable was $332 Mil.
Revenue was 867.034 + 975.17 + 965.685 + 1039.651 = $3,848 Mil.
Gross Profit was 126.241 + 166.681 + 166.127 + 188.78 = $648 Mil.
Total Current Assets was $1,914 Mil.
Total Assets was $10,007 Mil.
Property, Plant and Equipment(Net PPE) was $7,337 Mil.
Depreciation, Depletion and Amortization(DDA) was $526 Mil.
Selling, General & Admin. Expense(SGA) was $227 Mil.
Total Current Liabilities was $577 Mil.
Long-Term Debt was $5,086 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)
=(229.573 / 3102.489) / (332.08 / 3847.54)
=0.07399639 / 0.08630969
=0.8573

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)
=(102.557 / 3847.54) / (50.903 / 3102.489)
=0.16837486 / 0.12200623
=1.3801

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 - (1782.071 + 6734.286) / 8990.193) / (1 - (1914.104 + 7337.098) / 10006.777)
=0.05270588 / 0.07550633
=0.698

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
=3102.489 / 3847.54
=0.8064

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))
=(525.508 / (525.508 + 7337.098)) / (447.704 / (447.704 + 6734.286))
=0.06683636 / 0.06233704
=1.0722

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)
=(133.448 / 3102.489) / (226.831 / 3847.54)
=0.04301321 / 0.05895481
=0.7296

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)
=((5118.002 + 488.222) / 8990.193) / ((5085.879 + 577.069) / 10006.777)
=0.62359329 / 0.56591128
=1.1019

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
=(-641.832 - -42.921 - 55.742) / 8990.193
=-0.0728

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 -3.02 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

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 1.14291.38240.89650.7510.75650.78841.1691.09290.79780.8573
GMI 0.98241.04451.14311.30031.27421.41071.40391.32171.36881.3801
AQI 0.66680.61780.62930.97260.93460.71270.71540.77030.76650.698
SGI 1.26531.34511.33021.24221.08140.89770.8160.77470.77210.8064
DEPI 2.26571.82031.55140.62030.67540.88781.04221.16961.11581.0722
SGAI 0.72860.82170.80940.96611.17472.12232.35062.3461.96990.7296
LVGI 1.08951.04111.22931.18561.23141.10531.12961.01541.03941.1019
TATA -0.055-0.0488-0.0513-0.081-0.0881-0.0992-0.1061-0.0696-0.076-0.0728
M-score -2.35-2.07-2.57-2.82-3.07-3.37-3.16-3.06-3.29-3.02
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