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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.
Arcos Dorados Holdings Inc has a M-score of -2.86 suggests that the company is not a manipulator.
During the past 5 years, the highest Beneish M-Score of Arcos Dorados Holdings Inc was -1.14. The lowest was -4.33. And the median was -2.57.
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 * 0.8897||+||0.528 * 0.9928||+||0.404 * 0.9583||+||0.892 * 1.0309||+||0.115 * 0.9272|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9932||+||4.679 * -0.0533||-||0.327 * 1.0973|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $204 Mil.|
Revenue was 915.494 + 1046.003 + 1021.212 + 989.185 = $3,972 Mil.
Gross Profit was 100.981 + 186.25 + 162.487 + 155.23 = $605 Mil.
Total Current Assets was $558 Mil.
Total Assets was $2,062 Mil.
Property, Plant and Equipment(Net PPE) was $1,233 Mil.
Depreciation, Depletion and Amortization(DDA) was $114 Mil.
Selling, General & Admin. Expense(SGA) was $368 Mil.
Total Current Liabilities was $619 Mil.
Long-Term Debt was $780 Mil.
Net Income was -20.63 + 32.09 + 19.581 + 8.785 = $40 Mil.
Non Operating Income was -20.755 + -7.617 + 19.191 + -32.349 = $-42 Mil.
Cash Flow from Operations was -39.992 + 133.525 + 79.068 + 18.593 = $191 Mil.
|Accounts Receivable was $223 Mil.
Revenue was 976.91 + 1009.677 + 961.907 + 904.212 = $3,853 Mil.
Gross Profit was 120.643 + 171.664 + 156.428 + 133.842 = $583 Mil.
Total Current Assets was $553 Mil.
Total Assets was $2,022 Mil.
Property, Plant and Equipment(Net PPE) was $1,192 Mil.
Depreciation, Depletion and Amortization(DDA) was $101 Mil.
Selling, General & Admin. Expense(SGA) was $359 Mil.
Total Current Liabilities was $597 Mil.
Long-Term Debt was $654 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)|
|=||(204.413 / 3971.894)||/||(222.852 / 3852.706)|
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)|
|=||(186.25 / 3852.706)||/||(100.981 / 3971.894)|
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 - (557.99 + 1232.815) / 2061.704)||/||(1 - (552.984 + 1192.18) / 2022.483)|
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))|
|=||(101.32 / (101.32 + 1192.18))||/||(113.755 / (113.755 + 1232.815))|
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)|
|=||(367.861 / 3971.894)||/||(359.276 / 3852.706)|
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)|
|=||((779.639 + 619.346) / 2061.704)||/||((653.835 + 596.794) / 2022.483)|
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|
|=||(39.826 - -41.53||-||191.194)||/||2061.704|
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 -2.86 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