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Arch Coal Inc (NYSE:ACI)
Beneish M-Score
-2.55 (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 -2.55 suggests that the company is not a manipulator.

ACI' s 10-Year Beneish M-Score Range
Min: -8.67   Max: -1.31
Current: -2.55

-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 -2.82.


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 * 1.254+0.528 * 1.4269+0.404 * 0.7045+0.892 * 0.8922+0.115 * 1.1551
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0614+4.679 * -0.0601-0.327 * 1.1095
=-2.55

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
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.
Net Income was -97.218 + -96.86 + -124.139 + -371.214 = $-689 Mil.
Non Operating Income was 0 + 0 + 0 + -42.921 = $-43 Mil.
Cash Flow from Operations was 80.336 + -38.071 + -40.275 + -130.85 = $-129 Mil.
Accounts Receivable was $191 Mil.
Revenue was 791.269 + 766.332 + 737.37 + 968.231 = $3,263 Mil.
Gross Profit was 102.557 + 110.134 + 87.627 + 159.157 = $459 Mil.
Total Current Assets was $2,030 Mil.
Total Assets was $9,531 Mil.
Property, Plant and Equipment(Net PPE) was $6,778 Mil.
Depreciation, Depletion and Amortization(DDA) was $497 Mil.
Selling, General & Admin. Expense(SGA) was $131 Mil.
Total Current Liabilities was $580 Mil.
Long-Term Debt was $5,074 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)
=(213.369 / 2911.313) / (190.723 / 3263.202)
=0.07328961 / 0.05844658
=1.254

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)
=(91.639 / 3263.202) / (95.084 / 2911.313)
=0.14080495 / 0.09867816
=1.4269

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 - (1625.717 + 6532.118) / 8618.782) / (1 - (2029.639 + 6778.225) / 9531.455)
=0.05348169 / 0.07591611
=0.7045

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
=2911.313 / 3263.202
=0.8922

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))
=(497.349 / (497.349 + 6778.225)) / (410.883 / (410.883 + 6532.118))
=0.06835873 / 0.05917945
=1.1551

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)
=(124.34 / 2911.313) / (131.305 / 3263.202)
=0.04270925 / 0.04023809
=1.0614

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)
=((5126.186 + 546.521) / 8618.782) / ((5074.384 + 579.777) / 9531.455)
=0.65817966 / 0.59321069
=1.1095

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
=(-689.431 - -42.921 - -128.86) / 8618.782
=-0.0601

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 -2.55 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 1.15020.75311.18791.12280.75651.02730.88191.35990.67021.1037
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 -2.89-3.03-2.46-2.64-3.04-2.66-3.02-2.08-3.30-2.89

Arch Coal Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.76960.71340.67021.03031.0290.93041.10371.11820.92571.254
GMI 1.31271.28121.37721.38731.29081.35761.48791.54591.54551.4269
AQI 0.97260.93460.71270.71540.77030.76650.6980.69190.71130.7045
SGI 1.26971.13550.97050.86630.78570.73840.72480.78120.83170.8922
DEPI 0.7370.68340.85360.93471.07761.06221.11521.111.11541.1551
SGAI 0.85320.78961.17111.33011.38541.52831.3711.21191.1071.0614
LVGI 1.18561.23141.18521.12961.01541.03941.02761.11241.11531.1095
TATA -0.0811-0.0892-0.0992-0.1061-0.0696-0.076-0.0728-0.0709-0.0697-0.0601
M-score -2.74-2.99-3.30-3.08-2.97-3.14-2.89-2.79-2.90-2.55
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