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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 -0.85. The lowest was -4.33. And the median was -2.65.
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 * 1.9523||+||0.528 * 0.9848||+||0.404 * 1.0045||+||0.892 * 0.9466||+||0.115 * 0.9778|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0831||+||4.679 * -0.0888||-||0.327 * 1.0808|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $160 Mil.|
Revenue was 904.02 + 917.922 + 915.494 + 1046.003 = $3,783 Mil.
Gross Profit was 107.264 + 98.41 + 100.981 + 233.903 = $541 Mil.
Total Current Assets was $447 Mil.
Total Assets was $1,848 Mil.
Property, Plant and Equipment(Net PPE) was $1,153 Mil.
Depreciation, Depletion and Amortization(DDA) was $115 Mil.
Selling, General & Admin. Expense(SGA) was $349 Mil.
Total Current Liabilities was $557 Mil.
Long-Term Debt was $775 Mil.
Net Income was 0.24 + -98.986 + -20.63 + 32.09 = $-87 Mil.
Non Operating Income was -7.611 + -35.582 + -20.755 + -7.617 = $-72 Mil.
Cash Flow from Operations was 30.735 + 24.054 + -39.992 + 133.525 = $148 Mil.
|Accounts Receivable was $86 Mil.
Revenue was 1021.212 + 989.185 + 976.91 + 1009.677 = $3,997 Mil.
Gross Profit was 146.453 + 123.611 + 120.643 + 171.664 = $562 Mil.
Total Current Assets was $754 Mil.
Total Assets was $2,213 Mil.
Property, Plant and Equipment(Net PPE) was $1,164 Mil.
Depreciation, Depletion and Amortization(DDA) was $114 Mil.
Selling, General & Admin. Expense(SGA) was $341 Mil.
Total Current Liabilities was $589 Mil.
Long-Term Debt was $886 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)|
|=||(159.838 / 3783.439)||/||(86.493 / 3996.984)|
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)|
|=||(98.41 / 3996.984)||/||(107.264 / 3783.439)|
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 - (447.258 + 1153.497) / 1848.297)||/||(1 - (754.461 + 1163.777) / 2213.356)|
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))|
|=||(113.501 / (113.501 + 1163.777))||/||(115.308 / (115.308 + 1153.497))|
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)|
|=||(349.153 / 3783.439)||/||(340.546 / 3996.984)|
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)|
|=||((774.685 + 556.678) / 1848.297)||/||((886.332 + 588.816) / 2213.356)|
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|
|=||(-87.286 - -71.565||-||148.322)||/||1848.297|
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 -2.12 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