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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.
During the past 4 years, the highest Beneish M-Score of Ares Commercial Real Estate Corp was -2.85. The lowest was -2.85. And the median was -2.85.
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 * 1.0776||+||0.404 * 0.9911||+||0.892 * 1.4246||+||0.115 * 1|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8088||+||4.679 * 0.0199||-||0.327 * 0.9706|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $0.0 Mil.|
Revenue was 30.832 + 28.615 + 29.214 + 23.045 = $111.7 Mil.
Gross Profit was 23.747 + 20.026 + 21.832 + 15.035 = $80.6 Mil.
Total Current Assets was $1,445.7 Mil.
Total Assets was $1,544.8 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 $41.1 Mil.
Total Current Liabilities was $21.0 Mil.
Long-Term Debt was $1,011.6 Mil.
Net Income was 8.967 + 7.062 + 8.9 + 4.102 = $29.0 Mil.
Non Operating Income was -21.012 + -23.17 + 0 + 0 = $-44.2 Mil.
Cash Flow from Operations was 97.437 + 125.554 + -209.814 + 29.222 = $42.4 Mil.
|Accounts Receivable was $67.7 Mil.
Revenue was 25.827 + 20.383 + 17.648 + 14.556 = $78.4 Mil.
Gross Profit was 18.992 + 15.311 + 14.134 + 12.561 = $61.0 Mil.
Total Current Assets was $1,329.6 Mil.
Total Assets was $1,421.6 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 $35.7 Mil.
Total Current Liabilities was $10.5 Mil.
Long-Term Debt was $968.6 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)|
|=||(0 / 111.706)||/||(67.668 / 78.414)|
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)|
|=||(20.026 / 78.414)||/||(23.747 / 111.706)|
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 - (1445.738 + 0) / 1544.838)||/||(1 - (1329.577 + 0) / 1421.588)|
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))|
|=||(0.062 / (0.062 + 0))||/||(0.207 / (0.207 + 0))|
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)|
|=||(41.094 / 111.706)||/||(35.666 / 78.414)|
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)|
|=||((1011.633 + 21.011) / 1544.838)||/||((968.605 + 10.484) / 1421.588)|
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|
|=||(29.031 - -44.182||-||42.399)||/||1544.838|
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 -2.85 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
Ares Commercial Real Estate Corp Annual Data
Ares Commercial Real Estate Corp Quarterly Data