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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 -2.89.
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 * 0.921||+||0.528 * 1.0135||+||0.404 * 0.9997||+||0.892 * 0.968||+||0.115 * 1.0145|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0013||+||4.679 * -0.0737||-||0.327 * 0.9017|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $60.9 Mil.|
Revenue was 103.77 + 103.55 + 104.539 + 106.418 = $418.3 Mil.
Gross Profit was 36.392 + 33.737 + 35.301 + 35.943 = $141.4 Mil.
Total Current Assets was $110.1 Mil.
Total Assets was $400.5 Mil.
Property, Plant and Equipment(Net PPE) was $57.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $32.5 Mil.
Selling, General & Admin. Expense(SGA) was $104.6 Mil.
Total Current Liabilities was $66.8 Mil.
Long-Term Debt was $150.1 Mil.
Net Income was -55.904 + 2.574 + 3.061 + 80.286 = $30.0 Mil.
Non Operating Income was -0.029 + -0.023 + -0.071 + -0.071 = $-0.2 Mil.
Cash Flow from Operations was 16.58 + 5.303 + 16.864 + 20.965 = $59.7 Mil.
|Accounts Receivable was $68.3 Mil.
Revenue was 113.389 + 104.319 + 107.594 + 106.807 = $432.1 Mil.
Gross Profit was 40.859 + 36.021 + 34.914 + 36.223 = $148.0 Mil.
Total Current Assets was $112.8 Mil.
Total Assets was $411.1 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 $107.9 Mil.
Total Current Liabilities was $79.3 Mil.
Long-Term Debt was $167.7 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)|
|=||(60.933 / 418.277)||/||(68.344 / 432.109)|
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)|
|=||(148.017 / 432.109)||/||(141.373 / 418.277)|
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 - (110.068 + 57.754) / 400.481)||/||(1 - (112.767 + 59.454) / 411.146)|
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))|
|=||(34.185 / (34.185 + 59.454))||/||(32.466 / (32.466 + 57.754))|
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)|
|=||(104.552 / 418.277)||/||(107.87 / 432.109)|
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)|
|=||((150.059 + 66.845) / 400.481)||/||((167.708 + 79.256) / 411.146)|
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|
|=||(30.017 - -0.194||-||59.712)||/||400.481|
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 -2.89 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