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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 0.79. The lowest was -5.16. And the median was -2.69.
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 * 1.0374||+||0.528 * 1.0245||+||0.404 * 0.3694||+||0.892 * 1.0247||+||0.115 * 0.9375|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9773||+||4.679 * -0.2779||-||0.327 * 1.2663|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|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 + 205.471 + 199.028 = $687 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 $669 Mil.
Total Current Liabilities was $231 Mil.
Long-Term Debt was $43 Mil.
Net Income was -27.488 + -3.91 + -5.302 + -73.748 = $-110 Mil.
Non Operating Income was 0 + 0.71 + 0.02 + 0.043 = $1 Mil.
Cash Flow from Operations was 11.746 + 7.97 + 15.988 + -5.946 = $30 Mil.
|Accounts Receivable was $36 Mil.
Revenue was 334.339 + 332.799 + 328.411 + 325.225 = $1,321 Mil.
Gross Profit was 208.632 + 73.308 + 201.389 + 203.853 = $687 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 $668 Mil.
Total Current Liabilities was $207 Mil.
Long-Term Debt was $50 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)|
|=||(37.983 / 1353.34)||/||(35.732 / 1320.774)|
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)|
|=||(73.038 / 1320.774)||/||(209.765 / 1353.34)|
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 - (119.687 + 354.514) / 507.272)||/||(1 - (143.24 + 354.081) / 603.888)|
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))|
|=||(31.833 / (31.833 + 354.081))||/||(34.203 / (34.203 + 354.514))|
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)|
|=||(669.03 / 1353.34)||/||(668.104 / 1320.774)|
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)|
|=||((42.924 + 231.071) / 507.272)||/||((50.246 + 207.349) / 603.888)|
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|
|=||(-110.448 - 0.773||-||29.758)||/||507.272|
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 -4.06 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