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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.
Educational Development Corp has a M-score of -2.88 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Educational Development Corp was -1.25. The lowest was -10000000.00. And the median was -2.57.
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 * 0.9233||+||0.528 * 0.9623||+||0.404 * 0.5211||+||0.892 * 1.0965||+||0.115 * 1.0105|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.995||+||4.679 * -0.0208||-||0.327 * 1.3398|
|This Year (May14) TTM:||Last Year (May13) TTM:|
|Accounts Receivable was $3.52 Mil.|
Revenue was 7.178 + 5.889 + 8.502 + 5.715 = $27.28 Mil.
Gross Profit was 4.335 + 3.798 + 5.208 + 3.054 = $16.40 Mil.
Total Current Assets was $15.24 Mil.
Total Assets was $17.88 Mil.
Property, Plant and Equipment(Net PPE) was $1.93 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.12 Mil.
Selling, General & Admin. Expense(SGA) was $14.86 Mil.
Total Current Liabilities was $5.34 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was 0.24 + -0.313 + 0.548 + 0.056 = $0.53 Mil.
Non Operating Income was 0.004 + -0.391 + 0.006 + 0.002 = $-0.38 Mil.
Cash Flow from Operations was -0.484 + 1.012 + 1.293 + -0.539 = $1.28 Mil.
|Accounts Receivable was $3.47 Mil.
Revenue was 5.991 + 5.564 + 7.864 + 5.464 = $24.88 Mil.
Gross Profit was 3.514 + 3.037 + 4.813 + 3.024 = $14.39 Mil.
Total Current Assets was $13.85 Mil.
Total Assets was $17.04 Mil.
Property, Plant and Equipment(Net PPE) was $1.90 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.11 Mil.
Selling, General & Admin. Expense(SGA) was $13.62 Mil.
Total Current Liabilities was $3.80 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)|
|=||(3.515 / 27.284)||/||(3.472 / 24.883)|
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)|
|=||(3.798 / 24.883)||/||(4.335 / 27.284)|
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 - (15.241 + 1.934) / 17.882)||/||(1 - (13.852 + 1.896) / 17.041)|
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 + 1.896))||/||(0.115 / (0.115 + 1.934))|
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)|
|=||(14.859 / 27.284)||/||(13.62 / 24.883)|
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 + 5.341) / 17.882)||/||((0 + 3.799) / 17.041)|
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|
|=||(0.531 - -0.379||-||1.282)||/||17.882|
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 -2.88 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