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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.
Five Star Quality Care Inc has a M-score of -2.89 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Five Star Quality Care Inc was 0.79. The lowest was -5.16. 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 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 * 0.9158||+||0.528 * 1.0157||+||0.404 * 1.0875||+||0.892 * 1.0207||+||0.115 * 0.9101|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0106||+||4.679 * -0.0716||-||0.327 * 1.1448|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $36 Mil.|
Revenue was 334.339 + 332.799 + 328.411 + 325.225 = $1,321 Mil.
Gross Profit was 208.632 + 207.487 + 201.389 + 204.034 = $822 Mil.
Total Current Assets was $143 Mil.
Total Assets was $604 Mil.
Property, Plant and Equipment(Net PPE) was $354 Mil.
Depreciation, Depletion and Amortization(DDA) was $32 Mil.
Selling, General & Admin. Expense(SGA) was $802 Mil.
Total Current Liabilities was $207 Mil.
Long-Term Debt was $50 Mil.
Net Income was -3.008 + -1.891 + -6.759 + -5.43 = $-17 Mil.
Non Operating Income was 0.023 + 0.013 + 0.313 + -0.192 = $0 Mil.
Cash Flow from Operations was -6.741 + 26.042 + 8.982 + -2.302 = $26 Mil.
|Accounts Receivable was $38 Mil.
Revenue was 324.263 + 323.261 + 323.6 + 322.846 = $1,294 Mil.
Gross Profit was 204.115 + 205.356 + 205.204 + 202.827 = $818 Mil.
Total Current Assets was $149 Mil.
Total Assets was $573 Mil.
Property, Plant and Equipment(Net PPE) was $331 Mil.
Depreciation, Depletion and Amortization(DDA) was $27 Mil.
Selling, General & Admin. Expense(SGA) was $778 Mil.
Total Current Liabilities was $177 Mil.
Long-Term Debt was $37 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)|
|=||(35.732 / 1320.774)||/||(38.226 / 1293.97)|
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)|
|=||(207.487 / 1293.97)||/||(208.632 / 1320.774)|
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 - (143.24 + 354.081) / 603.888)||/||(1 - (148.678 + 331.108) / 572.725)|
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))|
|=||(26.873 / (26.873 + 331.108))||/||(31.833 / (31.833 + 354.081))|
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)|
|=||(802.283 / 1320.774)||/||(777.763 / 1293.97)|
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)|
|=||((50.246 + 207.349) / 603.888)||/||((36.758 + 176.652) / 572.725)|
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|
|=||(-17.088 - 0.157||-||25.981)||/||603.888|
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 -2.89 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