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DGSE Companies Inc (AMEX:DGSE)
Beneish M-Score
1.63 (As of Today)

Warning Sign:

Beneish M-Score 1.63 higher than -2.22, which implies that it might have manipulated its financial results.

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.

DGSE Companies Inc has a M-score of 1.63 signals that the company is a manipulator.

DGSE' s 10-Year Beneish M-Score Range
Min: -4.24   Max: 8.3
Current: 1.63

-4.24
8.3

During the past 13 years, the highest Beneish M-Score of DGSE Companies Inc was 8.30. The lowest was -4.24. And the median was -2.30.


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 DGSE Companies 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 * 7.0929+0.528 * 0.898+0.404 * 0.056+0.892 * 0.7819+0.115 * 0.8857
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.127+4.679 * -0.1661-0.327 * 1.1662
=1.63

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $0.90 Mil.
Revenue was 18.12 + 17.04 + 17.518 + 19.896 = $72.57 Mil.
Gross Profit was 3.296 + 3.134 + 3.01 + 4.434 = $13.87 Mil.
Total Current Assets was $14.39 Mil.
Total Assets was $18.91 Mil.
Property, Plant and Equipment(Net PPE) was $4.37 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.38 Mil.
Selling, General & Admin. Expense(SGA) was $13.99 Mil.
Total Current Liabilities was $8.90 Mil.
Long-Term Debt was $3.92 Mil.
Net Income was 0.272 + 0.18 + -4.452 + -0.523 = $-4.52 Mil.
Non Operating Income was 0.13 + 0.006 + 0.031 + 0.031 = $0.20 Mil.
Cash Flow from Operations was 0.253 + -0.299 + -1.356 + -0.179 = $-1.58 Mil.
Accounts Receivable was $0.16 Mil.
Revenue was 20.791 + 19 + 23.775 + 29.25 = $92.82 Mil.
Gross Profit was 4.434 + 3.312 + 2.885 + 5.303 = $15.93 Mil.
Total Current Assets was $16.64 Mil.
Total Assets was $24.90 Mil.
Property, Plant and Equipment(Net PPE) was $4.59 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.35 Mil.
Selling, General & Admin. Expense(SGA) was $15.87 Mil.
Total Current Liabilities was $10.34 Mil.
Long-Term Debt was $4.14 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)
=(0.904 / 72.574) / (0.163 / 92.816)
=0.01245625 / 0.00175616
=7.0929

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)
=(3.134 / 92.816) / (3.296 / 72.574)
=0.17167299 / 0.19117039
=0.898

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 - (14.387 + 4.366) / 18.909) / (1 - (16.643 + 4.589) / 24.904)
=0.00825004 / 0.14744619
=0.056

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
=72.574 / 92.816
=0.7819

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))
=(0.353 / (0.353 + 4.589)) / (0.383 / (0.383 + 4.366))
=0.07142857 / 0.08064856
=0.8857

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)
=(13.987 / 72.574) / (15.873 / 92.816)
=0.19272742 / 0.17101577
=1.127

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)
=((3.92 + 8.902) / 18.909) / ((4.141 + 10.339) / 24.904)
=0.6780898 / 0.5814327
=1.1662

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
=(-4.523 - 0.198 - -1.581) / 18.909
=-0.1661

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.

DGSE Companies Inc has a M-score of 1.63 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.

DGSE Companies Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.61191.23922.50820.31640.39891.13911.31030.49550.33296.828
GMI 1.13161.13270.90051.45410.85420.95621.03940.76121.16420.9121
AQI 0.84781.33892.83670.49820.98730.026525.861.00611.13890.056
SGI 1.24151.23331.43571.60760.84340.96721.68540.91890.68110.8122
DEPI 1.25190.95752.0930.60771.17160.92161.36090.50961.75690.8857
SGAI 0.88360.86961.22510.53141.53481.12530.66942.04410.85031.0861
LVGI 1.0671.01080.91421.32961.01491.50140.49040.80951.60711.1662
TATA 0.02540.03050.1243-0.2154-0.05170.1491-0.0944-0.0726-0.1934-0.1648
M-score -2.47-1.690.68-3.61-3.57-2.298.30-3.65-4.231.43

DGSE Companies Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 1.76820.49551.57320.33090.12720.31230.56150.91872.15477.0929
GMI 0.55580.76110.88670.94251.19571.10621.01870.92430.8630.898
AQI 0.62541.00610.87820.90560.93161.13891.01280.05990.06060.056
SGI 1.06380.91890.83430.81320.83030.72580.67140.64610.6870.7819
DEPI 0.66030.51020.56850.82471.18751.75472.01091.40721.17250.8857
SGAI 1.8452.0441.71041.30450.96390.88170.98841.14831.16161.127
LVGI 0.94220.80950.97780.82921.73471.60711.65341.9051.21541.1662
TATA 0.125-0.0726-0.1217-0.1555-0.1771-0.1941-0.2773-0.4554-0.3071-0.1661
M-score -1.68-3.65-2.94-4.07-4.40-4.24-4.55-5.70-3.661.63
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