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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 Educational Development Corp was -1.27. The lowest was -10000000.00. And the median was -2.59.
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 Educational Development 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 * 0.8278||+||0.528 * 0.9445||+||0.404 * 0.5888||+||0.892 * 1.1956||+||0.115 * 1.0725|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.027||+||4.679 * 0.0096||-||0.327 * 1.2082|
|This Year (Nov14) TTM:||Last Year (Nov13) TTM:|
|Accounts Receivable was $4.61 Mil.|
Revenue was 10.937 + 6.808 + 7.178 + 5.889 = $30.81 Mil.
Gross Profit was 6.822 + 3.795 + 4.335 + 3.798 = $18.75 Mil.
Total Current Assets was $16.21 Mil.
Total Assets was $18.96 Mil.
Property, Plant and Equipment(Net PPE) was $2.05 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.12 Mil.
Selling, General & Admin. Expense(SGA) was $17.32 Mil.
Total Current Liabilities was $6.46 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was 0.526 + -0.004 + 0.24 + -0.313 = $0.45 Mil.
Non Operating Income was -0.019 + -0.011 + 0.004 + -0.391 = $-0.42 Mil.
Cash Flow from Operations was 2.101 + -1.945 + -0.484 + 1.012 = $0.68 Mil.
|Accounts Receivable was $4.66 Mil.
Revenue was 8.502 + 5.715 + 5.991 + 5.564 = $25.77 Mil.
Gross Profit was 5.208 + 3.054 + 3.514 + 3.037 = $14.81 Mil.
Total Current Assets was $15.30 Mil.
Total Assets was $18.34 Mil.
Property, Plant and Equipment(Net PPE) was $1.89 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.11 Mil.
Selling, General & Admin. Expense(SGA) was $14.11 Mil.
Total Current Liabilities was $5.17 Mil.
Long-Term Debt was $0.00 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)|
|=||(4.609 / 30.812)||/||(4.657 / 25.772)|
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)|
|=||(3.795 / 25.772)||/||(6.822 / 30.812)|
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 - (16.214 + 2.051) / 18.964)||/||(1 - (15.301 + 1.888) / 18.337)|
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))|
|=||(0.114 / (0.114 + 1.888))||/||(0.115 / (0.115 + 2.051))|
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)|
|=||(17.324 / 30.812)||/||(14.11 / 25.772)|
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)|
|=||((0 + 6.456) / 18.964)||/||((0 + 5.167) / 18.337)|
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|
|=||(0.449 - -0.417||-||0.684)||/||18.964|
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.
Educational Development Corp has a M-score of -2.68 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
Educational Development Corp Annual Data
Educational Development Corp Quarterly Data