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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 Mercer International Inc was 0.27. The lowest was -3.32. And the median was -2.39.
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 Mercer International 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 * 1.1004||+||0.528 * 1.2073||+||0.404 * 0.6||+||0.892 * 0.9017||+||0.115 * 0.9259|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0681||+||4.679 * -0.089||-||0.327 * 0.997|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $118.4 Mil.|
Revenue was 221.694 + 237.941 + 218.145 + 253.843 = $931.6 Mil.
Gross Profit was 51.446 + 39.894 + 27.063 + 39.869 = $158.3 Mil.
Total Current Assets was $401.9 Mil.
Total Assets was $1,158.7 Mil.
Property, Plant and Equipment(Net PPE) was $738.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $72.0 Mil.
Selling, General & Admin. Expense(SGA) was $44.5 Mil.
Total Current Liabilities was $93.2 Mil.
Long-Term Debt was $644.0 Mil.
Net Income was 18.489 + 11.926 + -4.241 + 8.769 = $34.9 Mil.
Non Operating Income was -2.359 + 0.005 + -0.409 + 0.059 = $-2.7 Mil.
Cash Flow from Operations was 29.603 + 36.436 + 11.277 + 63.466 = $140.8 Mil.
|Accounts Receivable was $119.4 Mil.
Revenue was 237.828 + 270.893 + 266.936 + 257.547 = $1,033.2 Mil.
Gross Profit was 54.878 + 56.497 + 45.25 + 55.295 = $211.9 Mil.
Total Current Assets was $388.8 Mil.
Total Assets was $1,182.8 Mil.
Property, Plant and Equipment(Net PPE) was $762.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $68.3 Mil.
Selling, General & Admin. Expense(SGA) was $46.2 Mil.
Total Current Liabilities was $104.4 Mil.
Long-Term Debt was $650.3 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)|
|=||(118.434 / 931.623)||/||(119.359 / 1033.204)|
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)|
|=||(211.92 / 1033.204)||/||(158.272 / 931.623)|
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 - (401.851 + 738.276) / 1158.708)||/||(1 - (388.811 + 762.391) / 1182.817)|
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))|
|=||(68.333 / (68.333 + 762.391))||/||(71.984 / (71.984 + 738.276))|
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)|
|=||(44.529 / 931.623)||/||(46.236 / 1033.204)|
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)|
|=||((644.012 + 93.17) / 1158.708)||/||((650.342 + 104.421) / 1182.817)|
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|
|=||(34.943 - -2.704||-||140.782)||/||1158.708|
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.
Mercer International Inc has a M-score of -2.96 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
Mercer International Inc Annual Data
Mercer International Inc Quarterly Data