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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 -3.94. And the median was -2.91.
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 * 1.4501||+||0.528 * 1.0353||+||0.404 * 1.1385||+||0.892 * 0.8462||+||0.115 * 2.7535|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0713||+||4.679 * -0.118||-||0.327 * 1.0582|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|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 + 131.743 = $390 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 $30 Mil.
Selling, General & Admin. Expense(SGA) was $259 Mil.
Total Current Liabilities was $581 Mil.
Long-Term Debt was $494 Mil.
Net Income was -35.924 + 6.973 + -28.233 + 10.043 = $-47 Mil.
Non Operating Income was -28.054 + 3.516 + -23.817 + -10.708 = $-59 Mil.
Cash Flow from Operations was 0 + 0 + 0 + 178.294 = $178 Mil.
|Accounts Receivable was $75 Mil.
Revenue was 904.02 + 917.922 + 915.494 + 1046.003 = $3,783 Mil.
Gross Profit was 107.264 + 98.41 + 100.981 + 170.63 = $477 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 $286 Mil.
Total Current Liabilities was $557 Mil.
Long-Term Debt was $775 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)|
|=||(92.167 / 3201.383)||/||(75.115 / 3783.439)|
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)|
|=||(83.953 / 3783.439)||/||(89.331 / 3201.383)|
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 - (319.249 + 875.553) / 1409.769)||/||(1 - (447.258 + 1153.497) / 1848.297)|
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))|
|=||(115.308 / (115.308 + 1153.497))||/||(29.884 / (29.884 + 875.553))|
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)|
|=||(259.146 / 3201.383)||/||(285.88 / 3783.439)|
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)|
|=||((493.662 + 580.92) / 1409.769)||/||((774.685 + 556.678) / 1848.297)|
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|
|=||(-47.141 - -59.063||-||178.294)||/||1409.769|
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 -2.51 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