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Education Management Corp (NAS:EDMC)
Beneish M-Score
-3.29 (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 -3.29 suggests that the company is not a manipulator.

EDMC' s 10-Year Beneish M-Score Range
Min: -5.73   Max: -1.85
Current: -3.29

-5.73
-1.85

During the past 13 years, the highest Beneish M-Score of Education Management Corp was -1.85. The lowest was -5.73. And the median was -2.76.


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 * 1.261+0.528 * 1.0284+0.404 * 0.9398+0.892 * 0.924+0.115 * 0.9057
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0421+4.679 * -0.1959-0.327 * 1.1099
=-3.29

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $201 Mil.
Revenue was 593.673 + 580.38 + 595.236 + 638.903 = $2,408 Mil.
Gross Profit was 248.086 + 222.692 + 239.947 + 288.769 = $999 Mil.
Total Current Assets was $679 Mil.
Total Assets was $2,180 Mil.
Property, Plant and Equipment(Net PPE) was $477 Mil.
Depreciation, Depletion and Amortization(DDA) was $159 Mil.
Selling, General & Admin. Expense(SGA) was $692 Mil.
Total Current Liabilities was $359 Mil.
Long-Term Debt was $1,272 Mil.
Net Income was 1.089 + -9.514 + -2.033 + -283.994 = $-294 Mil.
Non Operating Income was 0 + 0 + 0 + -5.232 = $-5 Mil.
Cash Flow from Operations was -87.517 + 127.207 + -94.895 + 193.025 = $138 Mil.
Accounts Receivable was $173 Mil.
Revenue was 654.895 + 609.564 + 639.185 + 702.499 = $2,606 Mil.
Gross Profit was 294.518 + 228.268 + 269.25 + 320.295 = $1,112 Mil.
Total Current Assets was $786 Mil.
Total Assets was $2,694 Mil.
Property, Plant and Equipment(Net PPE) was $562 Mil.
Depreciation, Depletion and Amortization(DDA) was $164 Mil.
Selling, General & Admin. Expense(SGA) was $719 Mil.
Total Current Liabilities was $369 Mil.
Long-Term Debt was $1,448 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)
=(201.38 / 2408.192) / (172.826 / 2606.143)
=0.0836229 / 0.06631486
=1.261

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)
=(222.692 / 2606.143) / (248.086 / 2408.192)
=0.42681119 / 0.41503917
=1.0284

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 - (679.457 + 477.222) / 2180.088) / (1 - (786.068 + 562.184) / 2693.818)
=0.46943472 / 0.49950145
=0.9398

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
=2408.192 / 2606.143
=0.924

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))
=(163.979 / (163.979 + 562.184)) / (158.51 / (158.51 + 477.222))
=0.22581569 / 0.24933463
=0.9057

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)
=(692.044 / 2408.192) / (718.684 / 2606.143)
=0.28737077 / 0.27576537
=1.0421

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)
=((1272.387 + 359.389) / 2180.088) / ((1447.699 + 368.982) / 2693.818)
=0.74849089 / 0.67438892
=1.1099

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
=(-294.452 - -5.232 - 137.82) / 2180.088
=-0.1959

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 -3.29 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

Jun04Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13
DSRI 0.98630.92940.87511.16031.00741.16191.1120.79691.36371.1709
GMI 0.96620.96790.95460.83780.99980.99080.94811.01041.07441.0832
AQI 1.28410.87552.18840.98220.96980.94940.95890.97420.69860.9284
SGI 1.33281.1951.1481.16541.2351.19431.24711.15110.95610.905
DEPI 0.97681.00731.05190.88131.07761.02351.05330.88590.88670.8205
SGAI 11.02141.27930.90391.07631.02431.09370.95231.04090.9982
LVGI 1.45870.72032.42870.97180.98060.97510.80610.97581.59141.0854
TATA -0.1012-0.0956-0.0503-0.037-0.0212-0.0441-0.0203-0.0349-0.5267-0.1961
M-score -2.72-2.80-2.75-2.44-2.37-2.38-2.24-2.70-4.94-3.36

Education Management Corp Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 1.10861.45531.29131.36371.22831.11171.24791.17091.65881.261
GMI 1.02031.03441.04461.07441.10981.12461.10631.08321.03561.0284
AQI 0.97980.99230.9530.69860.70810.71840.69340.92840.88450.9398
SGI 1.09981.04080.99090.95610.92590.90840.90250.9050.91850.924
DEPI 0.88780.87360.87780.88670.8710.82990.83470.82050.86340.9057
SGAI 0.95811.03891.06911.04081.02731.01090.98070.99821.0111.0421
LVGI 0.97360.96571.05361.59141.54291.61531.54291.08541.10441.1099
TATA -0.0338-0.0274-0.0773-0.5267-0.5078-0.5804-0.6692-0.1961-0.167-0.1959
M-score -2.44-2.15-2.62-4.94-4.97-5.45-5.73-3.36-2.81-3.29
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