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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 -3.52. And the median was -2.75.
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 * 0.9026||+||0.528 * 0.6864||+||0.404 * 0.9321||+||0.892 * 0.9553||+||0.115 * 0.9956|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8714||+||4.679 * -0.0661||-||0.327 * 1.0629|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $198 Mil.|
Revenue was 677.005 + 745.192 + 742.18 + 713.776 = $2,878 Mil.
Gross Profit was 114.683 + 134.546 + 95.084 + 91.639 = $436 Mil.
Total Current Assets was $1,531 Mil.
Total Assets was $8,315 Mil.
Property, Plant and Equipment(Net PPE) was $6,371 Mil.
Depreciation, Depletion and Amortization(DDA) was $419 Mil.
Selling, General & Admin. Expense(SGA) was $108 Mil.
Total Current Liabilities was $523 Mil.
Long-Term Debt was $5,118 Mil.
Net Income was -113.195 + -240.136 + -97.218 + -96.86 = $-547 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -4.273 + -35.572 + 80.336 + -38.071 = $2 Mil.
|Accounts Receivable was $230 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.
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)|
|=||(198.314 / 2878.153)||/||(230.002 / 3012.958)|
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)|
|=||(134.546 / 3012.958)||/||(114.683 / 2878.153)|
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 - (1530.989 + 6371.335) / 8314.94)||/||(1 - (1737.328 + 6616.144) / 8823.184)|
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))|
|=||(433.259 / (433.259 + 6616.144))||/||(419.199 / (419.199 + 6371.335))|
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)|
|=||(107.692 / 2878.153)||/||(129.375 / 3012.958)|
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)|
|=||((5117.982 + 523.351) / 8314.94)||/||((5112.995 + 518.872) / 8823.184)|
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|
|=||(-547.409 - 0||-||2.42)||/||8314.94|
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 -3.11 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