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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 0.54. The lowest was -5.17. And the median was -2.76.
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 * 0.9847||+||0.528 * 0.9925||+||0.404 * 0.8749||+||0.892 * 1.0171||+||0.115 * 0.897|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9995||+||4.679 * -0.0392||-||0.327 * 0.8578|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $38 Mil.|
Revenue was 344.711 + 342.933 + 344.212 + 344.596 = $1,376 Mil.
Gross Profit was 209.856 + 74.012 + 77.349 + 206.573 = $568 Mil.
Total Current Assets was $148 Mil.
Total Assets was $531 Mil.
Property, Plant and Equipment(Net PPE) was $353 Mil.
Depreciation, Depletion and Amortization(DDA) was $38 Mil.
Selling, General & Admin. Expense(SGA) was $545 Mil.
Total Current Liabilities was $187 Mil.
Long-Term Debt was $59 Mil.
Net Income was -5.897 + -7.666 + -2.623 + -6.383 = $-23 Mil.
Non Operating Income was 0.012 + 0.344 + -0.109 + 0.122 = $0 Mil.
Cash Flow from Operations was -4.041 + 1.724 + -4.662 + 4.836 = $-2 Mil.
|Accounts Receivable was $38 Mil.
Revenue was 344.572 + 342.269 + 333.973 + 332.526 = $1,353 Mil.
Gross Profit was 209.765 + 73.038 + 72.218 + 199.028 = $554 Mil.
Total Current Assets was $120 Mil.
Total Assets was $507 Mil.
Property, Plant and Equipment(Net PPE) was $355 Mil.
Depreciation, Depletion and Amortization(DDA) was $34 Mil.
Selling, General & Admin. Expense(SGA) was $536 Mil.
Total Current Liabilities was $231 Mil.
Long-Term Debt was $43 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)|
|=||(38.04 / 1376.452)||/||(37.983 / 1353.34)|
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)|
|=||(554.049 / 1353.34)||/||(567.79 / 1376.452)|
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 - (147.846 + 352.561) / 530.676)||/||(1 - (119.687 + 354.514) / 507.272)|
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))|
|=||(33.794 / (33.794 + 354.514))||/||(37.882 / (37.882 + 352.561))|
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)|
|=||(544.661 / 1376.452)||/||(535.777 / 1353.34)|
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)|
|=||((58.978 + 186.909) / 530.676)||/||((42.924 + 231.071) / 507.272)|
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|
|=||(-22.569 - 0.369||-||-2.143)||/||530.676|
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 -2.68 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