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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 -2.82.
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 * 1.2803||+||0.528 * 1.053||+||0.404 * 0.9487||+||0.892 * 0.9016||+||0.115 * 1.0686|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9861||+||4.679 * -0.0584||-||0.327 * 0.9436|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $106 Mil.|
Revenue was 775.656 + 687.301 + 658.514 + 764.986 = $2,886 Mil.
Gross Profit was 94.877 + 69.559 + 70.943 + 153.41 = $389 Mil.
Total Current Assets was $384 Mil.
Total Assets was $1,441 Mil.
Property, Plant and Equipment(Net PPE) was $849 Mil.
Depreciation, Depletion and Amortization(DDA) was $102 Mil.
Selling, General & Admin. Expense(SGA) was $287 Mil.
Total Current Liabilities was $457 Mil.
Long-Term Debt was $580 Mil.
Net Income was -1.834 + 43.429 + 16.064 + 5.551 = $63 Mil.
Non Operating Income was -4.124 + 14.858 + 16.552 + -9.198 = $18 Mil.
Cash Flow from Operations was 50.509 + 28.539 + -18.859 + 69.096 = $129 Mil.
|Accounts Receivable was $92 Mil.
Revenue was 753.695 + 759.001 + 775.058 + 913.629 = $3,201 Mil.
Gross Profit was 89.331 + 83.953 + 85.075 + 195.682 = $454 Mil.
Total Current Assets was $319 Mil.
Total Assets was $1,410 Mil.
Property, Plant and Equipment(Net PPE) was $876 Mil.
Depreciation, Depletion and Amortization(DDA) was $113 Mil.
Selling, General & Admin. Expense(SGA) was $323 Mil.
Total Current Liabilities was $581 Mil.
Long-Term Debt was $494 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)|
|=||(106.391 / 2886.457)||/||(92.167 / 3201.383)|
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)|
|=||(454.041 / 3201.383)||/||(388.789 / 2886.457)|
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 - (384.15 + 848.637) / 1441.282)||/||(1 - (319.249 + 875.553) / 1409.769)|
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))|
|=||(113.143 / (113.143 + 875.553))||/||(101.782 / (101.782 + 848.637))|
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)|
|=||(287.251 / 2886.457)||/||(323.085 / 3201.383)|
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)|
|=||((579.864 + 456.782) / 1441.282)||/||((493.662 + 580.92) / 1409.769)|
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|
|=||(63.21 - 18.088||-||129.285)||/||1441.282|
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 -2.55 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