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Arch Coal Inc (NYSE:ACI)
Beneish M-Score
-2.96 (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 -2.96 suggests that the company is not a manipulator.

ACI' s 10-Year Beneish M-Score Range
Min: -8.67   Max: -1.31
Current: -2.96

-8.67
-1.31

During the past 13 years, the highest Beneish M-Score of Arch Coal Inc was -1.31. The lowest was -8.67. And the median was -2.83.


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 * 0.8544+0.528 * 1.5455+0.404 * 0.7113+0.892 * 0.8317+0.115 * 1.1154
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.107+4.679 * -0.0697-0.327 * 1.1153
=-2.96

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $239 Mil.
Revenue was 713.776 + 735.971 + 719.386 + 791.269 = $2,960 Mil.
Gross Profit was 91.639 + 49.657 + 50.903 + 102.557 = $295 Mil.
Total Current Assets was $1,582 Mil.
Total Assets was $8,656 Mil.
Property, Plant and Equipment(Net PPE) was $6,603 Mil.
Depreciation, Depletion and Amortization(DDA) was $417 Mil.
Selling, General & Admin. Expense(SGA) was $125 Mil.
Total Current Liabilities was $482 Mil.
Long-Term Debt was $5,116 Mil.
Net Income was -96.86 + -124.139 + -371.214 + -128.363 = $-721 Mil.
Non Operating Income was 0 + 0 + -42.921 + 0 = $-43 Mil.
Cash Flow from Operations was -38.071 + -40.275 + -130.85 + 134.547 = $-75 Mil.
Accounts Receivable was $337 Mil.
Revenue was 766.332 + 737.37 + 968.231 + 1087.618 = $3,560 Mil.
Gross Profit was 110.134 + 87.627 + 159.157 + 190.809 = $548 Mil.
Total Current Assets was $1,755 Mil.
Total Assets was $9,731 Mil.
Property, Plant and Equipment(Net PPE) was $7,231 Mil.
Depreciation, Depletion and Amortization(DDA) was $513 Mil.
Selling, General & Admin. Expense(SGA) was $136 Mil.
Total Current Liabilities was $564 Mil.
Long-Term Debt was $5,079 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)
=(239.151 / 2960.402) / (336.538 / 3559.551)
=0.08078329 / 0.09454507
=0.8544

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)
=(49.657 / 3559.551) / (91.639 / 2960.402)
=0.15387531 / 0.09956621
=1.5455

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 - (1581.788 + 6603.458) / 8656.108) / (1 - (1755.337 + 7231.221) / 9730.729)
=0.0543965 / 0.07647639
=0.7113

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
=2960.402 / 3559.551
=0.8317

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))
=(512.992 / (512.992 + 7231.221)) / (416.923 / (416.923 + 6603.458))
=0.06624198 / 0.05938752
=1.1154

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)
=(125.004 / 2960.402) / (135.771 / 3559.551)
=0.04222535 / 0.03814273
=1.107

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)
=((5116.353 + 481.792) / 8656.108) / ((5078.634 + 563.906) / 9730.729)
=0.64672772 / 0.57986817
=1.1153

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
=(-720.576 - -42.921 - -74.649) / 8656.108
=-0.0697

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 -2.96 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 1.0930.77541.19140.99190.83741.03680.88171.38240.72940.9538
GMI 0.08461.05660.56491.08520.81191.36650.79081.04451.37011.4879
AQI 0.64611.06671.10220.95410.84371.13681.05390.61780.71270.698
SGI 1.32861.31540.99670.96531.23620.86341.23691.34510.97040.7248
DEPI 1.42210.72731.22330.950.91521.09080.83151.81620.85361.1152
SGAI 0.85851.39410.43841.16041.02611.05730.97710.7491.16241.371
LVGI 1.03331.15140.96740.97030.96751.01521.09611.04111.18521.0276
TATA -0.0598-0.1092-0.0209-0.0513-0.0816-0.0704-0.1089-0.0488-0.0992-0.0728
M-score -2.95-3.01-2.46-2.76-2.97-2.65-3.02-2.06-3.25-3.03

Arch Coal Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.89660.73470.72040.72931.10121.07760.83430.95381.01950.8544
GMI 1.1371.31271.28121.37721.38731.29081.35761.48791.54591.5455
AQI 0.62930.97260.93460.71270.71540.77030.76650.6980.69190.7113
SGI 1.33011.26971.13550.97050.86630.78570.73840.72480.78120.8317
DEPI 1.74860.7370.68340.85360.93471.07761.06221.11521.111.1154
SGAI 0.73420.85320.78961.17111.33011.38541.52831.3711.21191.107
LVGI 1.22931.18561.23141.18521.12961.01541.03941.02761.11241.1153
TATA -0.051-0.0811-0.0892-0.0992-0.1061-0.0696-0.076-0.0728-0.0709-0.0697
M-score -2.54-2.77-2.99-3.24-3.02-2.93-3.22-3.03-2.89-2.96
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