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Ares Commercial Real Estate Corp (NYSE:ACRE)
Beneish M-Score
-2.82 (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.

Ares Commercial Real Estate Corp has a M-score of -2.82 suggests that the company is not a manipulator.

ACRE' s Beneish M-Score Range Over the Past 10 Years
Min: -2.94   Max: -1.38
Current: -2.82

-2.94
-1.38

During the past 4 years, the highest Beneish M-Score of Ares Commercial Real Estate Corp was -1.38. The lowest was -2.94. 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 Ares Commercial Real Estate Corp 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+0.528 * 0.9692+0.404 * 1.0107+0.892 * 1.4061+0.115 * 1
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7436+4.679 * 0.0358-0.327 * 0.9443
=-2.82

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

This Year (Sep15) TTM:Last Year (Sep14) TTM:
Accounts Receivable was $0.0 Mil.
Revenue was 32.623 + 30.832 + 28.615 + 29.775 = $121.8 Mil.
Gross Profit was 25.56 + 23.747 + 20.026 + 22.393 = $91.7 Mil.
Total Current Assets was $1,401.6 Mil.
Total Assets was $1,502.2 Mil.
Property, Plant and Equipment(Net PPE) was $0.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.2 Mil.
Selling, General & Admin. Expense(SGA) was $41.8 Mil.
Total Current Liabilities was $18.8 Mil.
Long-Term Debt was $958.1 Mil.
Net Income was 9.379 + 8.967 + 7.062 + 8.9 = $34.3 Mil.
Non Operating Income was -20.949 + -21.012 + -23.17 + 50.854 = $-14.3 Mil.
Cash Flow from Operations was -18.415 + 97.437 + 125.554 + -209.814 = $-5.2 Mil.
Accounts Receivable was $11.0 Mil.
Revenue was 22.795 + 25.827 + 20.383 + 17.648 = $86.7 Mil.
Gross Profit was 14.785 + 18.992 + 15.311 + 14.134 = $63.2 Mil.
Total Current Assets was $1,309.6 Mil.
Total Assets was $1,402.5 Mil.
Property, Plant and Equipment(Net PPE) was $0.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.1 Mil.
Selling, General & Admin. Expense(SGA) was $40.0 Mil.
Total Current Liabilities was $10.3 Mil.
Long-Term Debt was $955.5 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)
=(0 / 121.845) / (11.045 / 86.653)
=0 / 0.12746241
=0

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)
=(23.747 / 86.653) / (25.56 / 121.845)
=0.72959967 / 0.7528089
=0.9692

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 - (1401.612 + 0) / 1502.186) / (1 - (1309.577 + 0) / 1402.478)
=0.06695176 / 0.06624061
=1.0107

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
=121.845 / 86.653
=1.4061

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))
=(0.098 / (0.098 + 0)) / (0.226 / (0.226 + 0))
=1 / 1
=1

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)
=(41.818 / 121.845) / (39.996 / 86.653)
=0.34320653 / 0.46156509
=0.7436

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)
=((958.093 + 18.794) / 1502.186) / ((955.521 + 10.274) / 1402.478)
=0.65031028 / 0.68863469
=0.9443

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
=(34.308 - -14.277 - -5.238) / 1502.186
=0.0358

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.

Ares Commercial Real Estate Corp has a M-score of -2.82 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.

Ares Commercial Real Estate Corp Annual Data

Dec11Dec12Dec13Dec14
DSRI 1
GMI 1.1239
AQI 0.8166
SGI 2.1016
DEPI 1
SGAI 0.9794
LVGI 1.1557
TATA 0.1324
M-score -0.93

Ares Commercial Real Estate Corp Quarterly Data

Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15
DSRI 100
GMI 1.1161.07640.9692
AQI 0.84520.99111.0107
SGI 1.76371.42851.4061
DEPI 111
SGAI 0.86140.80660.7436
LVGI 1.04420.97060.9443
TATA 0.0879-0.00130.0358
M-score -1.38-2.94-2.82
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