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Education Management Corp (OTCPK:EDMC)
Beneish M-Score
-4.29 (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.

Education Management Corp has a M-score of -4.29 suggests that the company is not a manipulator.

EDMC' s 10-Year Beneish M-Score Range
Min: -4.96   Max: -1.73
Current: -4.29

-4.96
-1.73

During the past 13 years, the highest Beneish M-Score of Education Management Corp was -1.73. The lowest was -4.96. And the median was -2.69.


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 Education Management Corp 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 * 1.1195+0.528 * 1.4396+0.404 * 0.6553+0.892 * 0.9096+0.115 * 0.9105
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7473+4.679 * -0.3913-0.327 * 1.3994
=-4.29

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $210 Mil.
Revenue was 503.481 + 595.202 + 593.673 + 580.38 = $2,273 Mil.
Gross Profit was -870.218 + 595.202 + 248.086 + 222.692 = $196 Mil.
Total Current Assets was $876 Mil.
Total Assets was $1,877 Mil.
Property, Plant and Equipment(Net PPE) was $429 Mil.
Depreciation, Depletion and Amortization(DDA) was $153 Mil.
Selling, General & Admin. Expense(SGA) was $-36 Mil.
Total Current Liabilities was $635 Mil.
Long-Term Debt was $1,272 Mil.
Net Income was -187.845 + -467.646 + 1.089 + -9.514 = $-664 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -101.529 + 132.485 + -87.517 + 127.207 = $71 Mil.
Accounts Receivable was $206 Mil.
Revenue was 595.236 + 638.903 + 654.895 + 609.564 = $2,499 Mil.
Gross Profit was -851.861 + 638.903 + 294.518 + 228.268 = $310 Mil.
Total Current Assets was $772 Mil.
Total Assets was $2,423 Mil.
Property, Plant and Equipment(Net PPE) was $526 Mil.
Depreciation, Depletion and Amortization(DDA) was $165 Mil.
Selling, General & Admin. Expense(SGA) was $-53 Mil.
Total Current Liabilities was $486 Mil.
Long-Term Debt was $1,273 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)
=(210.182 / 2272.736) / (206.406 / 2498.598)
=0.09247972 / 0.08260873
=1.1195

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)
=(595.202 / 2498.598) / (-870.218 / 2272.736)
=0.12400074 / 0.08613495
=1.4396

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 - (875.966 + 429.457) / 1877.036) / (1 - (771.619 + 525.625) / 2423.356)
=0.30452959 / 0.46469111
=0.6553

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
=2272.736 / 2498.598
=0.9096

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))
=(164.712 / (164.712 + 525.625)) / (152.501 / (152.501 + 429.457))
=0.23859651 / 0.26204812
=0.9105

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)
=(-35.709 / 2272.736) / (-52.531 / 2498.598)
=-0.0157119 / -0.02102419
=0.7473

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)
=((1271.586 + 635.325) / 1877.036) / ((1273.164 + 486.098) / 2423.356)
=1.01591605 / 0.72596102
=1.3994

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
=(-663.916 - 0 - 70.646) / 1877.036
=-0.3913

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.

Education Management Corp has a M-score of -4.29 suggests that the company will not 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.

Education Management Corp Annual Data

Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14
DSRI 0.79330.88741.19071.00241.18241.10080.81661.34781.12171.1195
GMI 0.96790.95460.83780.99980.99080.94811.01041.07441.08321.0639
AQI 0.87552.18840.98220.96980.94940.95890.97420.69860.98110.6553
SGI 1.1951.1481.16541.2351.19431.24711.15110.95610.9050.9096
DEPI 1.00731.05190.88131.07761.02351.05330.88590.88670.82050.9105
SGAI 1.02141.27930.90391.07631.02431.09370.95231.04090.99821.065
LVGI 0.72032.42870.97180.98060.97510.80610.97581.59141.0371.3994
TATA -0.0956-0.0503-0.037-0.0212-0.0441-0.0203-0.0349-0.5267-0.1776-0.3913
M-score -2.92-2.74-2.41-2.38-2.36-2.25-2.68-4.96-3.28-4.54

Education Management Corp Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 1.27861.34781.25211.09951.21521.12171.58061.13381.24231.1195
GMI 1.04461.07441.10981.12460.83563.67633.56013.98676.21491.4396
AQI 0.9530.69860.70810.71840.73270.98110.88450.93980.71780.6553
SGI 0.99090.95610.92590.90840.90250.9050.91850.9240.930.9096
DEPI 0.87780.88670.8710.82990.83470.82050.86340.90570.89080.9105
SGAI 1.06911.04081.02731.01091.4756-0.0761-0.0807-0.0747-0.05040.7473
LVGI 1.05361.59141.54291.61531.4751.0371.10441.10991.27661.3994
TATA -0.0773-0.5267-0.5078-0.5804-0.6302-0.1776-0.1576-0.1851-0.2958-0.3913
M-score -2.63-4.96-4.95-5.46-5.77-1.73-1.31-1.60-0.99-4.29
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