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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 9 years, the highest Beneish M-Score of ARC Document Solutions Inc was -2.02. The lowest was -4.46. And the median was -3.02.
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 ARC Document Solutions 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 * 1.0488||+||0.528 * 1.0537||+||0.404 * 0.8776||+||0.892 * 0.9479||+||0.115 * 1.0745|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9855||+||4.679 * -0.2524||-||0.327 * 1.1018|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $59.7 Mil.|
Revenue was 98.558 + 100.443 + 103.77 + 103.55 = $406.3 Mil.
Gross Profit was 30.384 + 32.73 + 36.392 + 33.737 = $133.2 Mil.
Total Current Assets was $111.8 Mil.
Total Assets was $399.6 Mil.
Property, Plant and Equipment(Net PPE) was $60.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $31.8 Mil.
Selling, General & Admin. Expense(SGA) was $100.2 Mil.
Total Current Liabilities was $66.9 Mil.
Long-Term Debt was $143.4 Mil.
Net Income was 2.624 + 2.841 + -55.904 + 2.574 = $-47.9 Mil.
Non Operating Income was -0.034 + -0.05 + -0.029 + -0.023 = $-0.1 Mil.
Cash Flow from Operations was 19.096 + 12.163 + 16.58 + 5.303 = $53.1 Mil.
|Accounts Receivable was $60.1 Mil.
Revenue was 104.539 + 106.418 + 113.389 + 104.319 = $428.7 Mil.
Gross Profit was 35.301 + 35.943 + 40.859 + 36.021 = $148.1 Mil.
Total Current Assets was $109.7 Mil.
Total Assets was $474.5 Mil.
Property, Plant and Equipment(Net PPE) was $57.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $33.7 Mil.
Selling, General & Admin. Expense(SGA) was $107.3 Mil.
Total Current Liabilities was $69.7 Mil.
Long-Term Debt was $157.0 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)|
|=||(59.735 / 406.321)||/||(60.085 / 428.665)|
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)|
|=||(148.124 / 428.665)||/||(133.243 / 406.321)|
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 - (111.804 + 60.735) / 399.577)||/||(1 - (109.706 + 57.59) / 474.538)|
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))|
|=||(33.661 / (33.661 + 57.59))||/||(31.751 / (31.751 + 60.735))|
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)|
|=||(100.214 / 406.321)||/||(107.28 / 428.665)|
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)|
|=||((143.4 + 66.912) / 399.577)||/||((157.018 + 69.675) / 474.538)|
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|
|=||(-47.865 - -0.136||-||53.142)||/||399.577|
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.
ARC Document Solutions Inc has a M-score of -3.71 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
ARC Document Solutions Inc Annual Data
ARC Document Solutions Inc Quarterly Data