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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.
Arch Coal Inc has a M-score of -2.85 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Arch Coal Inc was 2.99. The lowest was -3.51. And the median was -2.73.
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 * 0.9372||+||0.528 * 1.4831||+||0.404 * 0.6919||+||0.892 * 0.8499||+||0.115 * 1.0385|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.6642||+||4.679 * -0.0709||-||0.327 * 1.1124|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $275 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.
Net Income was -124.139 + -371.214 + -128.363 + -72.206 = $-696 Mil.
Non Operating Income was 0 + -42.921 + 0 + 0 = $-43 Mil.
Cash Flow from Operations was -40.275 + -130.85 + 134.547 + 8.754 = $-28 Mil.
|Accounts Receivable was $345 Mil.
Revenue was 737.37 + 867.034 + 975.17 + 965.685 = $3,545 Mil.
Gross Profit was 87.627 + 126.241 + 166.681 + 166.127 = $547 Mil.
Total Current Assets was $1,884 Mil.
Total Assets was $9,920 Mil.
Property, Plant and Equipment(Net PPE) was $7,273 Mil.
Depreciation, Depletion and Amortization(DDA) was $496 Mil.
Selling, General & Admin. Expense(SGA) was $229 Mil.
Total Current Liabilities was $610 Mil.
Long-Term Debt was $5,082 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)|
|=||(274.812 / 3012.958)||/||(345.044 / 3545.259)|
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)|
|=||(50.903 / 3545.259)||/||(49.657 / 3012.958)|
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 - (1737.328 + 6616.144) / 8823.184)||/||(1 - (1884.382 + 7272.541) / 9920.144)|
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))|
|=||(495.824 / (495.824 + 7272.541))||/||(433.259 / (433.259 + 6616.144))|
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)|
|=||(129.375 / 3012.958)||/||(229.179 / 3545.259)|
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)|
|=||((5112.995 + 518.872) / 8823.184)||/||((5082.205 + 610.258) / 9920.144)|
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|
|=||(-695.922 - -42.921||-||-27.824)||/||8823.184|
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 -2.85 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