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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 0.14. The lowest was -6.03. And the median was -2.42.
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 * 0.9434||+||0.528 * 0.5778||+||0.404 * 1.8701||+||0.892 * 1.1248||+||0.115 * 0.8568|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9003||+||4.679 * -0.0239||-||0.327 * 0.8891|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $139 Mil.|
Revenue was 301.61 + 285.192 + 305.685 + 282.682 = $1,175 Mil.
Gross Profit was 59.465 + 34.959 + 49.679 + 24.159 = $168 Mil.
Total Current Assets was $554 Mil.
Total Assets was $1,548 Mil.
Property, Plant and Equipment(Net PPE) was $924 Mil.
Depreciation, Depletion and Amortization(DDA) was $79 Mil.
Selling, General & Admin. Expense(SGA) was $49 Mil.
Total Current Liabilities was $145 Mil.
Long-Term Debt was $836 Mil.
Net Income was 88.337 + 0.571 + 21.041 + -9.833 = $100 Mil.
Non Operating Income was 31.89 + 2.467 + 3.234 + 4.852 = $42 Mil.
Cash Flow from Operations was 36.849 + 21.289 + 59.679 + -23.165 = $95 Mil.
|Accounts Receivable was $131 Mil.
Revenue was 269.218 + 274.7 + 261.785 + 239.043 = $1,045 Mil.
Gross Profit was 29.664 + 11.07 + 24.351 + 21.34 = $86 Mil.
Total Current Assets was $500 Mil.
Total Assets was $1,588 Mil.
Property, Plant and Equipment(Net PPE) was $1,049 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $49 Mil.
Total Current Liabilities was $199 Mil.
Long-Term Debt was $932 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)|
|=||(139.326 / 1175.169)||/||(131.301 / 1044.746)|
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)|
|=||(34.959 / 1044.746)||/||(59.465 / 1175.169)|
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 - (554.13 + 923.993) / 1547.916)||/||(1 - (500.229 + 1049.044) / 1587.548)|
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))|
|=||(76.219 / (76.219 + 1049.044))||/||(79.317 / (79.317 + 923.993))|
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)|
|=||(49.334 / 1175.169)||/||(48.715 / 1044.746)|
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)|
|=||((836.315 + 144.721) / 1547.916)||/||((932.371 + 199.339) / 1587.548)|
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|
|=||(100.116 - 42.443||-||94.652)||/||1547.916|
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 -2.37 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