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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 -1.06. The lowest was -5.42. And the median was -2.89.
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 * 1.9581||+||0.528 * 0.8887||+||0.404 * 0.9043||+||0.892 * 0.8364||+||0.115 * 3.6334|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.3632||+||4.679 * 0.018||-||0.327 * 1.07|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $93 Mil.|
Revenue was 658.514 + 764.986 + 753.695 + 759.001 = $2,936 Mil.
Gross Profit was 70.943 + 153.41 + 89.331 + 83.953 = $398 Mil.
Total Current Assets was $537 Mil.
Total Assets was $1,596 Mil.
Property, Plant and Equipment(Net PPE) was $847 Mil.
Depreciation, Depletion and Amortization(DDA) was $25 Mil.
Selling, General & Admin. Expense(SGA) was $308 Mil.
Total Current Liabilities was $592 Mil.
Long-Term Debt was $657 Mil.
Net Income was 16.064 + 5.551 + -35.924 + 6.973 = $-7 Mil.
Non Operating Income was 16.552 + -9.198 + -28.054 + 3.516 = $-17 Mil.
Cash Flow from Operations was -18.859 + 0 + 0 + 0 = $-19 Mil.
|Accounts Receivable was $57 Mil.
Revenue was 775.058 + 913.629 + 904.02 + 917.922 = $3,511 Mil.
Gross Profit was 85.075 + 131.743 + 107.264 + 98.41 = $422 Mil.
Total Current Assets was $334 Mil.
Total Assets was $1,555 Mil.
Property, Plant and Equipment(Net PPE) was $993 Mil.
Depreciation, Depletion and Amortization(DDA) was $116 Mil.
Selling, General & Admin. Expense(SGA) was $270 Mil.
Total Current Liabilities was $426 Mil.
Long-Term Debt was $712 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)|
|=||(92.867 / 2936.196)||/||(56.706 / 3510.629)|
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)|
|=||(422.492 / 3510.629)||/||(397.637 / 2936.196)|
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 - (537.413 + 846.542) / 1595.866)||/||(1 - (333.565 + 993.163) / 1555.07)|
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))|
|=||(116.491 / (116.491 + 993.163))||/||(25.187 / (25.187 + 846.542))|
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)|
|=||(308.238 / 2936.196)||/||(270.36 / 3510.629)|
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)|
|=||((657.411 + 591.557) / 1595.866)||/||((711.813 + 425.578) / 1555.07)|
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|
|=||(-7.336 - -17.184||-||-18.859)||/||1595.866|
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 -1.54 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