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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 -3.02 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Arch Coal Inc was -1.87. The lowest was -3.51. And the median was -2.81.
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 * 0.8573||+||0.528 * 1.3801||+||0.404 * 0.698||+||0.892 * 0.8064||+||0.115 * 1.0722|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7296||+||4.679 * -0.0728||-||0.327 * 1.1019|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $230 Mil.|
Revenue was 719.386 + 791.269 + 766.332 + 825.502 = $3,102 Mil.
Gross Profit was 50.903 + 102.557 + 110.134 + 114.929 = $379 Mil.
Total Current Assets was $1,782 Mil.
Total Assets was $8,990 Mil.
Property, Plant and Equipment(Net PPE) was $6,734 Mil.
Depreciation, Depletion and Amortization(DDA) was $448 Mil.
Selling, General & Admin. Expense(SGA) was $133 Mil.
Total Current Liabilities was $488 Mil.
Long-Term Debt was $5,118 Mil.
Net Income was -371.214 + -128.363 + -72.206 + -70.049 = $-642 Mil.
Non Operating Income was -42.921 + 0 + 0 + 0 = $-43 Mil.
Cash Flow from Operations was -130.85 + 134.547 + 8.754 + 43.291 = $56 Mil.
|Accounts Receivable was $332 Mil.
Revenue was 867.034 + 975.17 + 965.685 + 1039.651 = $3,848 Mil.
Gross Profit was 126.241 + 166.681 + 166.127 + 188.78 = $648 Mil.
Total Current Assets was $1,914 Mil.
Total Assets was $10,007 Mil.
Property, Plant and Equipment(Net PPE) was $7,337 Mil.
Depreciation, Depletion and Amortization(DDA) was $526 Mil.
Selling, General & Admin. Expense(SGA) was $227 Mil.
Total Current Liabilities was $577 Mil.
Long-Term Debt was $5,086 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)|
|=||(229.573 / 3102.489)||/||(332.08 / 3847.54)|
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)|
|=||(102.557 / 3847.54)||/||(50.903 / 3102.489)|
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 - (1782.071 + 6734.286) / 8990.193)||/||(1 - (1914.104 + 7337.098) / 10006.777)|
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))|
|=||(525.508 / (525.508 + 7337.098))||/||(447.704 / (447.704 + 6734.286))|
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)|
|=||(133.448 / 3102.489)||/||(226.831 / 3847.54)|
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)|
|=||((5118.002 + 488.222) / 8990.193)||/||((5085.879 + 577.069) / 10006.777)|
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|
|=||(-641.832 - -42.921||-||55.742)||/||8990.193|
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 -3.02 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