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Beneish M-Score -0.98 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.
Education Management Corp has a M-score of -0.98 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Education Management Corp was -0.98. The lowest was -5.74. And the median was -2.70.
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 * 1.3102||+||0.528 * 6.2149||+||0.404 * 0.7178||+||0.892 * 0.93||+||0.115 * 0.8908|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * -0.0504||+||4.679 * -0.3084||-||0.327 * 1.2766|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $220 Mil.|
Revenue was 595.202 + 593.673 + 580.38 + 595.236 = $2,364 Mil.
Gross Profit was 595.202 + 248.086 + 222.692 + -851.861 = $214 Mil.
Total Current Assets was $813 Mil.
Total Assets was $1,877 Mil.
Property, Plant and Equipment(Net PPE) was $443 Mil.
Depreciation, Depletion and Amortization(DDA) was $155 Mil.
Selling, General & Admin. Expense(SGA) was $-49 Mil.
Total Current Liabilities was $454 Mil.
Long-Term Debt was $1,272 Mil.
Net Income was -467.646 + 1.089 + -9.514 + -25.619 = $-502 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 132.485 + -87.517 + 127.207 + -94.895 = $77 Mil.
|Accounts Receivable was $181 Mil.
Revenue was 638.903 + 654.895 + 609.564 + 639.185 = $2,543 Mil.
Gross Profit was 638.903 + 294.518 + 228.268 + 269.25 = $1,431 Mil.
Total Current Assets was $780 Mil.
Total Assets was $2,457 Mil.
Property, Plant and Equipment(Net PPE) was $544 Mil.
Depreciation, Depletion and Amortization(DDA) was $164 Mil.
Selling, General & Admin. Expense(SGA) was $1,044 Mil.
Total Current Liabilities was $486 Mil.
Long-Term Debt was $1,283 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)|
|=||(220.023 / 2364.491)||/||(180.578 / 2542.547)|
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)|
|=||(248.086 / 2542.547)||/||(595.202 / 2364.491)|
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 - (812.524 + 442.902) / 1877.35)||/||(1 - (779.561 + 543.731) / 2457.362)|
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))|
|=||(163.636 / (163.636 + 543.731))||/||(155.352 / (155.352 + 442.902))|
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)|
|=||(-48.883 / 2364.491)||/||(1043.885 / 2542.547)|
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)|
|=||((1271.986 + 454.021) / 1877.35)||/||((1283.344 + 486.402) / 2457.362)|
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|
|=||(-501.69 - 0||-||77.28)||/||1877.35|
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 -0.98 signals that the company is likely to 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
Education Management Corp Annual Data
Education Management Corp Quarterly Data