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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 8 years, the highest Beneish M-Score of ARC Document Solutions Inc was -1.96. The lowest was -4.46. And the median was -2.90.
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 * 0.9948||+||0.528 * 1.0212||+||0.404 * 0.9076||+||0.892 * 0.955||+||0.115 * 1.025|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0108||+||4.679 * -0.2482||-||0.327 * 1.068|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $61.4 Mil.|
Revenue was 100.443 + 103.77 + 103.55 + 104.539 = $412.3 Mil.
Gross Profit was 32.73 + 36.392 + 33.737 + 35.301 = $138.2 Mil.
Total Current Assets was $109.2 Mil.
Total Assets was $395.6 Mil.
Property, Plant and Equipment(Net PPE) was $56.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $31.9 Mil.
Selling, General & Admin. Expense(SGA) was $103.6 Mil.
Total Current Liabilities was $62.4 Mil.
Long-Term Debt was $146.0 Mil.
Net Income was 2.841 + -55.904 + 2.574 + 3.061 = $-47.4 Mil.
Non Operating Income was -0.05 + -0.029 + -0.023 + -0.071 = $-0.2 Mil.
Cash Flow from Operations was 12.163 + 16.58 + 5.303 + 16.864 = $50.9 Mil.
|Accounts Receivable was $64.6 Mil.
Revenue was 106.418 + 113.389 + 104.319 + 107.594 = $431.7 Mil.
Gross Profit was 35.943 + 40.859 + 36.021 + 34.914 = $147.7 Mil.
Total Current Assets was $115.4 Mil.
Total Assets was $481.8 Mil.
Property, Plant and Equipment(Net PPE) was $58.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $34.1 Mil.
Selling, General & Admin. Expense(SGA) was $107.4 Mil.
Total Current Liabilities was $74.5 Mil.
Long-Term Debt was $163.2 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)|
|=||(61.373 / 412.302)||/||(64.6 / 431.72)|
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)|
|=||(147.737 / 431.72)||/||(138.16 / 412.302)|
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 - (109.168 + 56.923) / 395.565)||/||(1 - (115.381 + 58.459) / 481.772)|
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))|
|=||(34.064 / (34.064 + 58.459))||/||(31.908 / (31.908 + 56.923))|
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)|
|=||(103.629 / 412.302)||/||(107.355 / 431.72)|
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)|
|=||((145.978 + 62.449) / 395.565)||/||((163.151 + 74.534) / 481.772)|
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|
|=||(-47.428 - -0.173||-||50.91)||/||395.565|
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 -3.73 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