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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 13 years, the highest Beneish M-Score of American Realty Investors Inc was 26.54. The lowest was -4.60. And the median was -2.77.
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 American Realty Investors 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||+||0.528 * 1.0939||+||0.404 * 1.2035||+||0.892 * 0.6112||+||0.115 * 0.9023|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2909||+||4.679 * 0.0911||-||0.327 * 0.9197|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $22.9 Mil.|
Revenue was 19.326 + 20.848 + 20.583 + 8.181 = $68.9 Mil.
Gross Profit was 8.56 + 10.529 + 10.266 + 4.185 = $33.5 Mil.
Total Current Assets was $56.1 Mil.
Total Assets was $936.0 Mil.
Property, Plant and Equipment(Net PPE) was $684.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $19.2 Mil.
Selling, General & Admin. Expense(SGA) was $17.7 Mil.
Total Current Liabilities was $132.1 Mil.
Long-Term Debt was $659.1 Mil.
Net Income was -1.319 + 1.518 + 3.55 + 38.974 = $42.7 Mil.
Non Operating Income was -0.286 + -0.48 + 2.319 + -8.42 = $-6.9 Mil.
Cash Flow from Operations was -0.765 + 9.495 + -15.187 + -29.228 = $-35.7 Mil.
|Accounts Receivable was $0.0 Mil.
Revenue was 27.482 + 27.182 + 28.122 + 30.006 = $112.8 Mil.
Gross Profit was 13.44 + 14.638 + 14.209 + 17.741 = $60.0 Mil.
Total Current Assets was $9.4 Mil.
Total Assets was $1,065.4 Mil.
Property, Plant and Equipment(Net PPE) was $870.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $21.9 Mil.
Selling, General & Admin. Expense(SGA) was $22.5 Mil.
Total Current Liabilities was $173.4 Mil.
Long-Term Debt was $805.8 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)|
|=||(22.93 / 68.938)||/||(0 / 112.792)|
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)|
|=||(10.529 / 112.792)||/||(8.56 / 68.938)|
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 - (56.126 + 684.074) / 935.986)||/||(1 - (9.425 + 870.787) / 1065.376)|
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))|
|=||(21.948 / (21.948 + 870.787))||/||(19.161 / (19.161 + 684.074))|
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)|
|=||(17.743 / 68.938)||/||(22.489 / 112.792)|
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)|
|=||((659.121 + 132.065) / 935.986)||/||((805.804 + 173.407) / 1065.376)|
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|
|=||(42.723 - -6.867||-||-35.685)||/||935.986|
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.
American Realty Investors Inc has a M-score of -2.30 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
American Realty Investors Inc Annual Data
American Realty Investors Inc Quarterly Data