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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 Arcos Dorados Holdings Inc was -0.76. The lowest was -3.90. And the median was -2.90.
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 * 1.739||+||0.528 * 1.0525||+||0.404 * 0.9663||+||0.892 * 0.8546||+||0.115 * 0.9683|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0591||+||4.679 * -0.0563||-||0.327 * 0.9835|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $100 Mil.|
Revenue was 687.301 + 658.514 + 764.986 + 753.695 = $2,864 Mil.
Gross Profit was 69.559 + 70.943 + 153.41 + 89.331 = $383 Mil.
Total Current Assets was $421 Mil.
Total Assets was $1,494 Mil.
Property, Plant and Equipment(Net PPE) was $866 Mil.
Depreciation, Depletion and Amortization(DDA) was $104 Mil.
Selling, General & Admin. Expense(SGA) was $294 Mil.
Total Current Liabilities was $503 Mil.
Long-Term Debt was $581 Mil.
Net Income was 43.429 + 16.064 + 5.551 + -35.924 = $29 Mil.
Non Operating Income was 14.858 + 16.552 + -9.198 + -28.054 = $-6 Mil.
Cash Flow from Operations was 28.539 + -18.859 + 69.096 + 40.206 = $119 Mil.
|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 + 195.682 + 107.264 = $472 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 $115 Mil.
Selling, General & Admin. Expense(SGA) was $325 Mil.
Total Current Liabilities was $452 Mil.
Long-Term Debt was $718 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)|
|=||(100.02 / 2864.496)||/||(67.297 / 3351.708)|
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)|
|=||(471.974 / 3351.708)||/||(383.243 / 2864.496)|
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 - (420.916 + 865.782) / 1493.557)||/||(1 - (368.478 + 990.769) / 1586.67)|
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))|
|=||(115.287 / (115.287 + 990.769))||/||(104.445 / (104.445 + 865.782))|
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)|
|=||(293.775 / 2864.496)||/||(324.575 / 3351.708)|
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)|
|=||((580.556 + 502.548) / 1493.557)||/||((718.121 + 451.774) / 1586.67)|
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|
|=||(29.12 - -5.842||-||118.982)||/||1493.557|
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 -2.19 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
Arcos Dorados Holdings Inc Annual Data
Arcos Dorados Holdings Inc Quarterly Data