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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 -2.85.
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 * 0.9289||+||0.528 * 1.0041||+||0.404 * 1.1146||+||0.892 * 1.0005||+||0.115 * 0.9916|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9735||+||4.679 * 0.076||-||0.327 * 0.742|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $61.4 Mil.|
Revenue was 103.55 + 104.539 + 106.418 + 113.389 = $427.9 Mil.
Gross Profit was 33.737 + 35.301 + 35.943 + 40.859 = $145.8 Mil.
Total Current Assets was $104.7 Mil.
Total Assets was $466.0 Mil.
Property, Plant and Equipment(Net PPE) was $56.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $33.1 Mil.
Selling, General & Admin. Expense(SGA) was $106.2 Mil.
Total Current Liabilities was $64.3 Mil.
Long-Term Debt was $152.4 Mil.
Net Income was 2.574 + 3.061 + 80.286 + 9.257 = $95.2 Mil.
Non Operating Income was -0.023 + -0.071 + -0.071 + -0.067 = $-0.2 Mil.
Cash Flow from Operations was 5.303 + 16.864 + 20.965 + 16.864 = $60.0 Mil.
|Accounts Receivable was $66.0 Mil.
Revenue was 104.319 + 107.594 + 106.807 + 108.982 = $427.7 Mil.
Gross Profit was 36.021 + 34.914 + 36.223 + 39.207 = $146.4 Mil.
Total Current Assets was $110.4 Mil.
Total Assets was $410.1 Mil.
Property, Plant and Equipment(Net PPE) was $58.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $34.2 Mil.
Selling, General & Admin. Expense(SGA) was $109.0 Mil.
Total Current Liabilities was $85.0 Mil.
Long-Term Debt was $171.9 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)|
|=||(61.377 / 427.896)||/||(66.046 / 427.702)|
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)|
|=||(146.365 / 427.702)||/||(145.84 / 427.896)|
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 - (104.742 + 56.247) / 465.961)||/||(1 - (110.398 + 58.897) / 410.105)|
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))|
|=||(34.197 / (34.197 + 58.897))||/||(33.096 / (33.096 + 56.247))|
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)|
|=||(106.181 / 427.896)||/||(109.021 / 427.702)|
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)|
|=||((152.353 + 64.25) / 465.961)||/||((171.89 + 85.045) / 410.105)|
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|
|=||(95.178 - -0.232||-||59.996)||/||465.961|
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 -2.05 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