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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 Five Star Quality Care Inc was 0.51. The lowest was -3.63. And the median was -2.73.
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 Five Star Quality Care Inc 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 * 1.0774||+||0.528 * 0.9953||+||0.404 * 0.624||+||0.892 * 0.9752||+||0.115 * 0.8906|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0355||+||4.679 * -0.2021||-||0.327 * 1.243|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $39 Mil.|
Revenue was 332.526 + 334.339 + 332.799 + 328.411 = $1,328 Mil.
Gross Profit was 199.028 + 208.632 + 207.487 + 201.389 = $817 Mil.
Total Current Assets was $122 Mil.
Total Assets was $535 Mil.
Property, Plant and Equipment(Net PPE) was $357 Mil.
Depreciation, Depletion and Amortization(DDA) was $33 Mil.
Selling, General & Admin. Expense(SGA) was $803 Mil.
Total Current Liabilities was $215 Mil.
Long-Term Debt was $49 Mil.
Net Income was -73.748 + -3.008 + -1.891 + -6.759 = $-85 Mil.
Non Operating Income was 0.043 + 0.023 + 0.013 + 0.313 = $0 Mil.
Cash Flow from Operations was -5.946 + -6.741 + 26.042 + 8.982 = $22 Mil.
|Accounts Receivable was $37 Mil.
Revenue was 325.814 + 324.112 + 351.858 + 360.052 = $1,362 Mil.
Gross Profit was 206.07 + 203.902 + 209.244 + 214.14 = $833 Mil.
Total Current Assets was $151 Mil.
Total Assets was $590 Mil.
Property, Plant and Equipment(Net PPE) was $340 Mil.
Depreciation, Depletion and Amortization(DDA) was $28 Mil.
Selling, General & Admin. Expense(SGA) was $795 Mil.
Total Current Liabilities was $199 Mil.
Long-Term Debt was $36 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)|
|=||(38.814 / 1328.075)||/||(36.94 / 1361.836)|
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)|
|=||(208.632 / 1361.836)||/||(199.028 / 1328.075)|
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 - (121.781 + 357.186) / 534.973)||/||(1 - (150.884 + 340.276) / 590.183)|
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))|
|=||(28.109 / (28.109 + 340.276))||/||(33.47 / (33.47 + 357.186))|
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)|
|=||(803.293 / 1328.075)||/||(795.445 / 1361.836)|
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)|
|=||((49.373 + 215.392) / 534.973)||/||((36.461 + 198.528) / 590.183)|
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|
|=||(-85.406 - 0.392||-||22.337)||/||534.973|
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.
Five Star Quality Care Inc has a M-score of -3.63 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
Five Star Quality Care Inc Annual Data
Five Star Quality Care Inc Quarterly Data