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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 * 1.1685||+||0.528 * 0.5954||+||0.404 * 1.4501||+||0.892 * 0.9702||+||0.115 * 0.8827|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9707||+||4.679 * -0.0092||-||0.327 * 0.9482|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $153 Mil.|
Revenue was 266.936 + 257.547 + 282.625 + 301.61 = $1,109 Mil.
Gross Profit was 45.25 + 55.295 + 65.622 + 59.465 = $226 Mil.
Total Current Assets was $417 Mil.
Total Assets was $1,268 Mil.
Property, Plant and Equipment(Net PPE) was $800 Mil.
Depreciation, Depletion and Amortization(DDA) was $72 Mil.
Selling, General & Admin. Expense(SGA) was $48 Mil.
Total Current Liabilities was $112 Mil.
Long-Term Debt was $696 Mil.
Net Income was 16.412 + 13.634 + 3.205 + 88.337 = $122 Mil.
Non Operating Income was 2.266 + -7.148 + -27.681 + 31.89 = $-1 Mil.
Cash Flow from Operations was 10.434 + 59.845 + 26.771 + 36.849 = $134 Mil.
|Accounts Receivable was $135 Mil.
Revenue was 285.192 + 305.685 + 282.682 + 269.218 = $1,143 Mil.
Gross Profit was 34.959 + 49.679 + 24.159 + 29.664 = $138 Mil.
Total Current Assets was $558 Mil.
Total Assets was $1,609 Mil.
Property, Plant and Equipment(Net PPE) was $1,007 Mil.
Depreciation, Depletion and Amortization(DDA) was $79 Mil.
Selling, General & Admin. Expense(SGA) was $51 Mil.
Total Current Liabilities was $179 Mil.
Long-Term Debt was $902 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)|
|=||(152.767 / 1108.718)||/||(134.749 / 1142.777)|
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)|
|=||(55.295 / 1142.777)||/||(45.25 / 1108.718)|
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 - (417.367 + 800.244) / 1267.848)||/||(1 - (557.96 + 1006.906) / 1608.828)|
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))|
|=||(79.396 / (79.396 + 1006.906))||/||(72.244 / (72.244 + 800.244))|
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)|
|=||(47.618 / 1108.718)||/||(50.56 / 1142.777)|
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)|
|=||((696.114 + 111.798) / 1267.848)||/||((902.019 + 179.15) / 1608.828)|
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|
|=||(121.588 - -0.673||-||133.899)||/||1267.848|
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 -2.42 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