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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 Electro Rent Corp was 3.82. The lowest was -4.43. And the median was -3.08.
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 Electro Rent 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 * 1.1532||+||0.528 * 1.0479||+||0.404 * 1.4249||+||0.892 * 1.0065||+||0.115 * 0.9398|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0286||+||4.679 * -0.0947||-||0.327 * 0.8915|
|This Year (Nov14) TTM:||Last Year (Nov13) TTM:|
|Accounts Receivable was $38.4 Mil.|
Revenue was 59.703 + 61.871 + 61.077 + 62.016 = $244.7 Mil.
Gross Profit was 35.495 + 36.395 + 36.936 + 35.94 = $144.8 Mil.
Total Current Assets was $43.6 Mil.
Total Assets was $301.3 Mil.
Property, Plant and Equipment(Net PPE) was $230.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $58.1 Mil.
Selling, General & Admin. Expense(SGA) was $59.6 Mil.
Total Current Liabilities was $69.9 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 4.795 + 4.771 + 4.593 + 4.537 = $18.7 Mil.
Non Operating Income was 1.39 + 0 + 0 + 0 = $1.4 Mil.
Cash Flow from Operations was 10.564 + 12.432 + 10.852 + 11.993 = $45.8 Mil.
|Accounts Receivable was $33.1 Mil.
Revenue was 57.876 + 60.168 + 60.366 + 64.672 = $243.1 Mil.
Gross Profit was 37.379 + 37.838 + 39.019 + 36.48 = $150.7 Mil.
Total Current Assets was $41.3 Mil.
Total Assets was $312.1 Mil.
Property, Plant and Equipment(Net PPE) was $251.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $58.6 Mil.
Selling, General & Admin. Expense(SGA) was $57.6 Mil.
Total Current Liabilities was $81.1 Mil.
Long-Term Debt was $0.0 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)|
|=||(38.422 / 244.667)||/||(33.103 / 243.082)|
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)|
|=||(36.395 / 243.082)||/||(35.495 / 244.667)|
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 - (43.622 + 230.743) / 301.335)||/||(1 - (41.294 + 251.185) / 312.082)|
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))|
|=||(58.578 / (58.578 + 251.185))||/||(58.123 / (58.123 + 230.743))|
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)|
|=||(59.634 / 244.667)||/||(57.603 / 243.082)|
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 + 69.851) / 301.335)||/||((0 + 81.146) / 312.082)|
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|
|=||(18.696 - 1.39||-||45.841)||/||301.335|
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.
Electro Rent Corp has a M-score of -2.56 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
Electro Rent Corp Annual Data
Electro Rent Corp Quarterly Data