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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 6 years, the highest Beneish M-Score of Arcos Dorados Holdings Inc was -2.65. The lowest was -4.33. And the median was -3.11.
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 Arcos Dorados Holdings 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 * 0.8827||+||0.528 * 1.1543||+||0.404 * 1.0687||+||0.892 * 0.8593||+||0.115 * 0.816|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9177||+||4.679 * -0.1043||-||0.327 * 1.0418|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $67 Mil.|
Revenue was 759.001 + 775.058 + 913.629 + 904.02 = $3,352 Mil.
Gross Profit was 83.953 + 85.075 + 131.743 + 107.264 = $408 Mil.
Total Current Assets was $368 Mil.
Total Assets was $1,587 Mil.
Property, Plant and Equipment(Net PPE) was $991 Mil.
Depreciation, Depletion and Amortization(DDA) was $117 Mil.
Selling, General & Admin. Expense(SGA) was $261 Mil.
Total Current Liabilities was $452 Mil.
Long-Term Debt was $718 Mil.
Net Income was 6.973 + -28.233 + 10.043 + 0.24 = $-11 Mil.
Non Operating Income was 3.516 + -23.817 + -10.708 + -7.611 = $-39 Mil.
Cash Flow from Operations was 0 + 0 + 193.091 + 0 = $193 Mil.
|Accounts Receivable was $89 Mil.
Revenue was 917.922 + 915.494 + 1046.003 + 1021.212 = $3,901 Mil.
Gross Profit was 98.41 + 100.981 + 186.25 + 162.487 = $548 Mil.
Total Current Assets was $473 Mil.
Total Assets was $1,951 Mil.
Property, Plant and Equipment(Net PPE) was $1,217 Mil.
Depreciation, Depletion and Amortization(DDA) was $115 Mil.
Selling, General & Admin. Expense(SGA) was $331 Mil.
Total Current Liabilities was $595 Mil.
Long-Term Debt was $786 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)|
|=||(67.297 / 3351.708)||/||(88.727 / 3900.631)|
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)|
|=||(85.075 / 3900.631)||/||(83.953 / 3351.708)|
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 - (368.478 + 990.769) / 1586.67)||/||(1 - (472.501 + 1216.94) / 1951.123)|
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))|
|=||(114.588 / (114.588 + 1216.94))||/||(116.811 / (116.811 + 990.769))|
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)|
|=||(260.636 / 3351.708)||/||(330.522 / 3900.631)|
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)|
|=||((718.121 + 451.774) / 1586.67)||/||((785.731 + 595.104) / 1951.123)|
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|
|=||(-10.977 - -38.62||-||193.091)||/||1586.67|
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.
Arcos Dorados Holdings Inc has a M-score of -3.11 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
Arcos Dorados Holdings Inc Annual Data
Arcos Dorados Holdings Inc Quarterly Data