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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 -2.77.
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 * 0.9356||+||0.528 * 0.998||+||0.404 * 0.5684||+||0.892 * 1.0247||+||0.115 * 0.9128|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9805||+||4.679 * -0.1053||-||0.327 * 0.907|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $37 Mil.|
Revenue was 342.933 + 344.212 + 344.596 + 344.572 = $1,376 Mil.
Gross Profit was 74.012 + 77.349 + 206.573 + 209.765 = $568 Mil.
Total Current Assets was $169 Mil.
Total Assets was $552 Mil.
Property, Plant and Equipment(Net PPE) was $351 Mil.
Depreciation, Depletion and Amortization(DDA) was $37 Mil.
Selling, General & Admin. Expense(SGA) was $540 Mil.
Total Current Liabilities was $201 Mil.
Long-Term Debt was $59 Mil.
Net Income was -7.666 + -2.623 + -6.383 + -27.488 = $-44 Mil.
Non Operating Income was 0.344 + -0.109 + 0.122 + 0 = $0 Mil.
Cash Flow from Operations was 1.724 + -4.662 + 4.836 + 11.746 = $14 Mil.
|Accounts Receivable was $38 Mil.
Revenue was 342.269 + 333.973 + 332.526 + 334.339 = $1,343 Mil.
Gross Profit was 73.038 + 72.218 + 199.028 + 208.632 = $553 Mil.
Total Current Assets was $124 Mil.
Total Assets was $535 Mil.
Property, Plant and Equipment(Net PPE) was $357 Mil.
Depreciation, Depletion and Amortization(DDA) was $34 Mil.
Selling, General & Admin. Expense(SGA) was $537 Mil.
Total Current Liabilities was $235 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)|
|=||(36.909 / 1376.313)||/||(38.499 / 1343.107)|
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)|
|=||(552.916 / 1343.107)||/||(567.699 / 1376.313)|
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 - (169.329 + 351.492) / 552.419)||/||(1 - (124.449 + 357.118) / 535.454)|
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))|
|=||(33.914 / (33.914 + 357.118))||/||(36.903 / (36.903 + 351.492))|
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)|
|=||(539.754 / 1376.313)||/||(537.18 / 1343.107)|
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)|
|=||((59.457 + 200.678) / 552.419)||/||((43.281 + 234.724) / 535.454)|
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|
|=||(-44.16 - 0.357||-||13.644)||/||552.419|
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 -3.16 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