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Arch Coal Inc (NYSE:ACI)
Beneish M-Score
-2.92 (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 -2.92 suggests that the company is not a manipulator.

ACI' s 10-Year Beneish M-Score Range
Min: -3.51   Max: 2.99
Current: -2.92

-3.51
2.99

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.


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 * 0.8032+0.528 * 1.4729+0.404 * 0.7113+0.892 * 0.8848+0.115 * 1.0693
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.6188+4.679 * -0.0697-0.327 * 1.1153
=-2.92

* 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 + 867.034 + 975.17 = $3,346 Mil.
Gross Profit was 110.134 + 87.627 + 126.241 + 166.681 = $491 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 $490 Mil.
Selling, General & Admin. Expense(SGA) was $228 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 / 3345.906)
=0.08078329 / 0.10058202
=0.8032

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 / 3345.906) / (91.639 / 2960.402)
=0.14665176 / 0.09956621
=1.4729

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 / 3345.906
=0.8848

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))
=(490.342 / (490.342 + 7231.221)) / (416.923 / (416.923 + 6603.458))
=0.06350295 / 0.05938752
=1.0693

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) / (228.303 / 3345.906)
=0.04222535 / 0.06823354
=0.6188

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 -2.92 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

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.89650.7510.75650.78841.19811.12160.82010.88240.93720.8032
GMI 1.14311.30031.27421.41071.43831.35941.41691.44511.48311.4729
AQI 0.62930.97260.93460.71270.71540.77030.76650.6980.69190.7113
SGI 1.33021.24221.08140.89770.79620.75480.75120.78350.84990.8848
DEPI 1.55140.62030.67540.88781.04911.16961.11581.07221.03851.0693
SGAI 0.80940.96611.17472.12232.4092.40772.02480.75090.66420.6188
LVGI 1.22931.18561.23141.10531.12961.01541.03941.10191.11241.1153
TATA -0.0513-0.081-0.0881-0.0992-0.1061-0.0696-0.076-0.0728-0.0709-0.0697
M-score -2.57-2.82-3.07-3.37-3.14-3.04-3.27-2.99-2.85-2.92
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