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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 7 years, the highest Beneish M-Score of ARC Document Solutions Inc was -1.96. The lowest was -4.57. And the median was -3.03.
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 * 0.9752||+||0.528 * 0.9998||+||0.404 * 1.0954||+||0.892 * 1.0342||+||0.115 * 0.9915|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9902||+||4.679 * 0.085||-||0.327 * 0.764|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|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.
Net Income was 80.286 + 9.257 + 4.436 + -2.327 = $91.7 Mil.
Non Operating Income was -0.071 + -0.067 + -0.026 + -5.227 = $-5.4 Mil.
Cash Flow from Operations was 20.965 + 16.864 + 5.288 + 12.963 = $56.1 Mil.
|Accounts Receivable was $64.1 Mil.
Revenue was 106.807 + 108.982 + 100.373 + 101.285 = $417.4 Mil.
Gross Profit was 36.223 + 39.207 + 33.934 + 33.467 = $142.8 Mil.
Total Current Assets was $114.1 Mil.
Total Assets was $416.8 Mil.
Property, Plant and Equipment(Net PPE) was $59.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $34.2 Mil.
Selling, General & Admin. Expense(SGA) was $104.8 Mil.
Total Current Liabilities was $74.9 Mil.
Long-Term Debt was $194.2 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)|
|=||(64.6 / 431.72)||/||(64.056 / 417.447)|
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)|
|=||(40.859 / 417.447)||/||(35.943 / 431.72)|
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 - (115.381 + 58.459) / 481.772)||/||(1 - (114.079 + 59.515) / 416.791)|
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))|
|=||(34.216 / (34.216 + 59.515))||/||(34.064 / (34.064 + 58.459))|
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)|
|=||(107.355 / 431.72)||/||(104.837 / 417.447)|
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)|
|=||((163.151 + 74.534) / 481.772)||/||((194.238 + 74.923) / 416.791)|
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|
|=||(91.652 - -5.391||-||56.08)||/||481.772|
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 -1.96 signals that the company is likely to 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