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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 -3.97. 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 * 0.948||+||0.528 * 1.0096||+||0.404 * 0.6438||+||0.892 * 1.0281||+||0.115 * 1.0624|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9777||+||4.679 * -0.1589||-||0.327 * 1.1563|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $38 Mil.|
Revenue was 344.596 + 344.572 + 342.269 + 333.973 = $1,365 Mil.
Gross Profit was 206.573 + 209.765 + 73.038 + 205.471 = $695 Mil.
Total Current Assets was $112 Mil.
Total Assets was $532 Mil.
Property, Plant and Equipment(Net PPE) was $384 Mil.
Depreciation, Depletion and Amortization(DDA) was $34 Mil.
Selling, General & Admin. Expense(SGA) was $673 Mil.
Total Current Liabilities was $244 Mil.
Long-Term Debt was $60 Mil.
Net Income was -6.383 + -27.488 + -3.91 + -5.302 = $-43 Mil.
Non Operating Income was 0.122 + 0 + 0.71 + 0.02 = $1 Mil.
Cash Flow from Operations was 4.836 + 11.746 + 7.97 + 15.988 = $41 Mil.
|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 + 73.308 + 201.389 = $682 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 $669 Mil.
Total Current Liabilities was $215 Mil.
Long-Term Debt was $49 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)|
|=||(37.829 / 1365.41)||/||(38.814 / 1328.075)|
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)|
|=||(209.765 / 1328.075)||/||(206.573 / 1365.41)|
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 - (112.069 + 383.858) / 531.77)||/||(1 - (121.781 + 357.186) / 534.973)|
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))|
|=||(33.47 / (33.47 + 357.186))||/||(33.672 / (33.672 + 383.858))|
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)|
|=||(672.567 / 1365.41)||/||(669.114 / 1328.075)|
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)|
|=||((60.396 + 243.92) / 531.77)||/||((49.373 + 215.392) / 534.973)|
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|
|=||(-43.083 - 0.852||-||40.54)||/||531.77|
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 -3.43 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