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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 -2.83. The lowest was -4.32. And the median was -3.14.
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 * 1.0584||+||0.528 * 0.969||+||0.404 * 0.9707||+||0.892 * 1.0407||+||0.115 * 1.0484|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0688||+||4.679 * -0.0897||-||0.327 * 0.959|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $62.0 Mil.|
Revenue was 107.594 + 106.807 + 108.982 + 100.373 = $423.8 Mil.
Gross Profit was 34.914 + 36.223 + 39.207 + 33.934 = $144.3 Mil.
Total Current Assets was $112.1 Mil.
Total Assets was $414.1 Mil.
Property, Plant and Equipment(Net PPE) was $59.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $34.1 Mil.
Selling, General & Admin. Expense(SGA) was $107.7 Mil.
Total Current Liabilities was $91.4 Mil.
Long-Term Debt was $175.9 Mil.
Net Income was -2.327 + 3.661 + 4.545 + 1.396 = $7.3 Mil.
Non Operating Income was -5.227 + -0.325 + -0.023 + -0.026 = $-5.6 Mil.
Cash Flow from Operations was 12.963 + 15.311 + 14.024 + 7.714 = $50.0 Mil.
|Accounts Receivable was $56.3 Mil.
Revenue was 101.285 + 101.252 + 104.622 + 100.036 = $407.2 Mil.
Gross Profit was 33.467 + 32.88 + 35.611 + 32.379 = $134.3 Mil.
Total Current Assets was $106.4 Mil.
Total Assets was $409.9 Mil.
Property, Plant and Equipment(Net PPE) was $56.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $34.7 Mil.
Selling, General & Admin. Expense(SGA) was $96.8 Mil.
Total Current Liabilities was $77.7 Mil.
Long-Term Debt was $198.2 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)|
|=||(62.045 / 423.756)||/||(56.328 / 407.195)|
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)|
|=||(36.223 / 407.195)||/||(34.914 / 423.756)|
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 - (112.057 + 59.52) / 414.068)||/||(1 - (106.43 + 56.181) / 409.922)|
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))|
|=||(34.745 / (34.745 + 56.181))||/||(34.135 / (34.135 + 59.52))|
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)|
|=||(107.672 / 423.756)||/||(96.8 / 407.195)|
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)|
|=||((175.916 + 91.393) / 414.068)||/||((198.228 + 77.725) / 409.922)|
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|
|=||(7.275 - -5.601||-||50.012)||/||414.068|
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 -2.83 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