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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 -3.12.
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 * 0.7597||+||0.528 * 0.9524||+||0.404 * 0.7096||+||0.892 * 0.8722||+||0.115 * 1.0159|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1323||+||4.679 * -0.1423||-||0.327 * 0.8791|
|This Year (Nov15) TTM:||Last Year (Nov14) TTM:|
|Accounts Receivable was $25.5 Mil.|
Revenue was 43.31 + 53.343 + 60.413 + 56.342 = $213.4 Mil.
Gross Profit was 32.221 + 33.565 + 34.596 + 32.2 = $132.6 Mil.
Total Current Assets was $32.1 Mil.
Total Assets was $285.2 Mil.
Property, Plant and Equipment(Net PPE) was $235.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $58.0 Mil.
Selling, General & Admin. Expense(SGA) was $58.9 Mil.
Total Current Liabilities was $58.1 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 2.19 + 2.47 + 3.441 + 2.425 = $10.5 Mil.
Non Operating Income was 0.013 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 4.828 + 16.654 + 13.123 + 16.5 = $51.1 Mil.
|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.
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)|
|=||(25.461 / 213.408)||/||(38.422 / 244.667)|
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)|
|=||(33.565 / 244.667)||/||(32.221 / 213.408)|
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 - (32.055 + 235.017) / 285.185)||/||(1 - (43.622 + 230.743) / 301.335)|
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))|
|=||(58.123 / (58.123 + 230.743))||/||(58.044 / (58.044 + 235.017))|
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)|
|=||(58.896 / 213.408)||/||(59.634 / 244.667)|
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 + 58.115) / 285.185)||/||((0 + 69.851) / 301.335)|
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|
|=||(10.526 - 0.013||-||51.105)||/||285.185|
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 -3.60 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