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Arcos Dorados Holdings Inc (NYSE:ARCO)
Beneish M-Score
-2.19 (As of Today)

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 -2.19 signals that the company is a manipulator.

ARCO' s Beneish M-Score Range Over the Past 10 Years
Min: -3.9   Max: -0.76
Current: -2.19

-3.9
-0.76

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 -2.90.


Definition

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 * 1.739+0.528 * 1.0525+0.404 * 0.9663+0.892 * 0.8546+0.115 * 0.9683
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0591+4.679 * -0.0563-0.327 * 0.9835
=-2.19

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun16) TTM:Last Year (Jun15) TTM:
Accounts Receivable was $100 Mil.
Revenue was 687.301 + 658.514 + 764.986 + 753.695 = $2,864 Mil.
Gross Profit was 69.559 + 70.943 + 153.41 + 89.331 = $383 Mil.
Total Current Assets was $421 Mil.
Total Assets was $1,494 Mil.
Property, Plant and Equipment(Net PPE) was $866 Mil.
Depreciation, Depletion and Amortization(DDA) was $104 Mil.
Selling, General & Admin. Expense(SGA) was $294 Mil.
Total Current Liabilities was $503 Mil.
Long-Term Debt was $581 Mil.
Net Income was 43.429 + 16.064 + 5.551 + -35.924 = $29 Mil.
Non Operating Income was 14.858 + 16.552 + -9.198 + -28.054 = $-6 Mil.
Cash Flow from Operations was 28.539 + -18.859 + 69.096 + 40.206 = $119 Mil.
Accounts Receivable was $67 Mil.
Revenue was 759.001 + 775.058 + 913.629 + 904.02 = $3,352 Mil.
Gross Profit was 83.953 + 85.075 + 195.682 + 107.264 = $472 Mil.
Total Current Assets was $368 Mil.
Total Assets was $1,587 Mil.
Property, Plant and Equipment(Net PPE) was $991 Mil.
Depreciation, Depletion and Amortization(DDA) was $115 Mil.
Selling, General & Admin. Expense(SGA) was $325 Mil.
Total Current Liabilities was $452 Mil.
Long-Term Debt was $718 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(100.02 / 2864.496) / (67.297 / 3351.708)
=0.03491714 / 0.02007842
=1.739

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(471.974 / 3351.708) / (383.243 / 2864.496)
=0.14081597 / 0.13379073
=1.0525

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (420.916 + 865.782) / 1493.557) / (1 - (368.478 + 990.769) / 1586.67)
=0.13850091 / 0.14333352
=0.9663

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=2864.496 / 3351.708
=0.8546

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))
=(115.287 / (115.287 + 990.769)) / (104.445 / (104.445 + 865.782))
=0.10423252 / 0.10765007
=0.9683

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)
=(293.775 / 2864.496) / (324.575 / 3351.708)
=0.10255731 / 0.09683869
=1.0591

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)
=((580.556 + 502.548) / 1493.557) / ((718.121 + 451.774) / 1586.67)
=0.72518424 / 0.73732723
=0.9835

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(29.12 - -5.842 - 118.982) / 1493.557
=-0.0563

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 -2.19 signals that the company is likely to be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Arcos Dorados Holdings Inc Annual Data

Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.45080.77471.30971.88270.882
GMI 0.96481.22020.94291.12561.02
AQI 0.78330.94190.93361.14760.9752
SGI 1.21191.03821.06210.90520.8361
DEPI 0.98670.86780.86120.87520.8233
SGAI 1.09240.78451.14020.97421.1566
LVGI 1.00421.00791.09451.10681.0498
TATA -0.0621-0.046-0.0548-0.1269-0.0759
M-score -3.21-2.76-2.52-2.27-3.15

Arcos Dorados Holdings Inc Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
DSRI 0.88970.38210.91751.88270.31390.88271.45010.8821.95811.739
GMI 0.89730.88220.88661.12561.09921.05551.00741.021.02311.0525
AQI 0.95830.96871.00451.14761.11751.06871.13850.97520.90430.9663
SGI 1.03090.99060.94660.90520.88390.85930.84620.83610.83640.8546
DEPI 0.92720.99550.97780.87520.80470.82560.79410.82330.92630.9683
SGAI 1.17681.22831.29660.97421.02821.04311.09361.15661.10241.0591
LVGI 1.09731.1331.08081.10681.07791.04181.05821.04981.070.9835
TATA -0.0533-0.1028-0.0888-0.1269-0.1556-0.1165-0.1489-0.0759-0.0717-0.0563
M-score -2.94-3.70-3.16-2.27-3.90-3.24-2.90-3.15-2.16-2.19
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