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Arcos Dorados Holdings Inc (NYSE:ARCO)
Beneish M-Score
-3.27 (As of Today)

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.

Arcos Dorados Holdings Inc has a M-score of -3.27 suggests that the company is not a manipulator.

ARCO' s 10-Year Beneish M-Score Range
Min: -4.33   Max: -0.85
Current: -3.27

-4.33
-0.85

During the past 5 years, the highest Beneish M-Score of Arcos Dorados Holdings Inc was -0.85. The lowest was -4.33. And the median was -2.86.


Definition

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 * 0.7491+0.528 * 0.9779+0.404 * 0.9687+0.892 * 0.9906+0.115 * 0.9955
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0336+4.679 * -0.1028-0.327 * 1.1326
=-3.27

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $174 Mil.
Revenue was 917.922 + 915.494 + 1046.003 + 1021.212 = $3,901 Mil.
Gross Profit was 98.41 + 100.981 + 186.25 + 194.106 = $580 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 $362 Mil.
Total Current Liabilities was $595 Mil.
Long-Term Debt was $785 Mil.
Net Income was -98.986 + -20.63 + 32.09 + 19.581 = $-68 Mil.
Non Operating Income was -35.582 + -20.755 + -7.617 + -0.023 = $-64 Mil.
Cash Flow from Operations was 24.054 + -39.992 + 133.525 + 79.068 = $197 Mil.
Accounts Receivable was $234 Mil.
Revenue was 989.185 + 976.91 + 1009.677 + 961.907 = $3,938 Mil.
Gross Profit was 123.611 + 120.643 + 171.664 + 156.428 = $572 Mil.
Total Current Assets was $551 Mil.
Total Assets was $1,968 Mil.
Property, Plant and Equipment(Net PPE) was $1,145 Mil.
Depreciation, Depletion and Amortization(DDA) was $107 Mil.
Selling, General & Admin. Expense(SGA) was $354 Mil.
Total Current Liabilities was $604 Mil.
Long-Term Debt was $625 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(173.938 / 3900.631) / (234.412 / 3937.679)
=0.04459227 / 0.0595305
=0.7491

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(100.981 / 3937.679) / (98.41 / 3900.631)
=0.14535111 / 0.14862903
=0.9779

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (472.501 + 1216.94) / 1951.123) / (1 - (550.522 + 1144.619) / 1967.558)
=0.13411866 / 0.13845437
=0.9687

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=3900.631 / 3937.679
=0.9906

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))
=(107.246 / (107.246 + 1144.619)) / (114.588 / (114.588 + 1216.94))
=0.08566898 / 0.08605752
=0.9955

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)
=(362.141 / 3900.631) / (353.688 / 3937.679)
=0.09284165 / 0.08982144
=1.0336

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)
=((785.235 + 595.104) / 1951.123) / ((625.311 + 603.706) / 1967.558)
=0.70745873 / 0.6246408
=1.1326

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-67.945 - -63.977 - 196.655) / 1951.123
=-0.1028

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 -3.27 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Arcos Dorados Holdings Inc Annual Data

Dec09Dec10Dec11Dec12Dec13
DSRI 1.3097
GMI 1.0383
AQI 0.9336
SGI 1.0621
DEPI 0.8612
SGAI 0.9678
LVGI 1.0945
TATA -0.0548
M-score -2.44

Arcos Dorados Holdings Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 2.59442.77740.44121.30970.88970.7491
GMI 1.16541.18591.09771.03830.99280.9779
AQI 0.95561.08511.09020.93360.95830.9687
SGI 1.02671.04491.06691.06211.03090.9906
DEPI 0.82560.83280.80860.86120.92720.9955
SGAI 0.88170.89560.99620.96780.99321.0336
LVGI 1.07061.01031.09511.09451.09731.1326
TATA -0.0431-0.0371-0.0344-0.0548-0.0533-0.1028
M-score -1.14-0.85-3.06-2.44-2.86-3.27
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