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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 -3.27 suggests that the company is not a manipulator.
During the past 5 years, the highest Beneish M-Score of Arcos Dorados Holdings Inc was -0.85. The lowest was -4.33. And the median was -2.86.
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 * 0.7491||+||0.528 * 0.9779||+||0.404 * 0.9687||+||0.892 * 0.9906||+||0.115 * 0.9955|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0336||+||4.679 * -0.1028||-||0.327 * 1.1326|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $174 Mil.|
Revenue was 917.922 + 915.494 + 1046.003 + 1021.212 = $3,901 Mil.
Gross Profit was 98.41 + 100.981 + 186.25 + 194.106 = $580 Mil.
Total Current Assets was $473 Mil.
Total Assets was $1,951 Mil.
Property, Plant and Equipment(Net PPE) was $1,217 Mil.
Depreciation, Depletion and Amortization(DDA) was $115 Mil.
Selling, General & Admin. Expense(SGA) was $362 Mil.
Total Current Liabilities was $595 Mil.
Long-Term Debt was $785 Mil.
Net Income was -98.986 + -20.63 + 32.09 + 19.581 = $-68 Mil.
Non Operating Income was -35.582 + -20.755 + -7.617 + -0.023 = $-64 Mil.
Cash Flow from Operations was 24.054 + -39.992 + 133.525 + 79.068 = $197 Mil.
|Accounts Receivable was $234 Mil.
Revenue was 989.185 + 976.91 + 1009.677 + 961.907 = $3,938 Mil.
Gross Profit was 123.611 + 120.643 + 171.664 + 156.428 = $572 Mil.
Total Current Assets was $551 Mil.
Total Assets was $1,968 Mil.
Property, Plant and Equipment(Net PPE) was $1,145 Mil.
Depreciation, Depletion and Amortization(DDA) was $107 Mil.
Selling, General & Admin. Expense(SGA) was $354 Mil.
Total Current Liabilities was $604 Mil.
Long-Term Debt was $625 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)|
|=||(173.938 / 3900.631)||/||(234.412 / 3937.679)|
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)|
|=||(100.981 / 3937.679)||/||(98.41 / 3900.631)|
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 - (472.501 + 1216.94) / 1951.123)||/||(1 - (550.522 + 1144.619) / 1967.558)|
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))|
|=||(107.246 / (107.246 + 1144.619))||/||(114.588 / (114.588 + 1216.94))|
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)|
|=||(362.141 / 3900.631)||/||(353.688 / 3937.679)|
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)|
|=||((785.235 + 595.104) / 1951.123)||/||((625.311 + 603.706) / 1967.558)|
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|
|=||(-67.945 - -63.977||-||196.655)||/||1951.123|
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 -3.27 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