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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.
Mercer International Inc has a M-score of -2.73 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Mercer International Inc was 0.15. The lowest was -6.07. 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 * 1.0048||+||0.528 * 0.6093||+||0.404 * 1.1698||+||0.892 * 1.0605||+||0.115 * 0.9558|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9579||+||4.679 * -0.0415||-||0.327 * 0.9439|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $135 Mil.|
Revenue was 285.192 + 305.685 + 263.174 + 274.092 = $1,128 Mil.
Gross Profit was 34.959 + 49.679 + 22.584 + 30.274 = $137 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 $78 Mil.
Selling, General & Admin. Expense(SGA) was $50 Mil.
Total Current Liabilities was $179 Mil.
Long-Term Debt was $902 Mil.
Net Income was 0.571 + 21.041 + -9.432 + -2.996 = $9 Mil.
Non Operating Income was 2.467 + 3.234 + 4.463 + 2.901 = $13 Mil.
Cash Flow from Operations was 21.289 + 59.679 + -24.604 + 6.535 = $63 Mil.
|Accounts Receivable was $126 Mil.
Revenue was 274.7 + 261.785 + 239.043 + 288.283 = $1,064 Mil.
Gross Profit was 11.07 + 24.351 + 21.34 + 22.234 = $79 Mil.
Total Current Assets was $464 Mil.
Total Assets was $1,528 Mil.
Property, Plant and Equipment(Net PPE) was $1,028 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $49 Mil.
Total Current Liabilities was $184 Mil.
Long-Term Debt was $904 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)|
|=||(134.749 / 1128.143)||/||(126.454 / 1063.811)|
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)|
|=||(49.679 / 1063.811)||/||(34.959 / 1128.143)|
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 - (557.96 + 1006.906) / 1608.828)||/||(1 - (464.346 + 1028.044) / 1528.084)|
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))|
|=||(76.18 / (76.18 + 1028.044))||/||(78.335 / (78.335 + 1006.906))|
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)|
|=||(49.905 / 1128.143)||/||(49.129 / 1063.811)|
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)|
|=||((902.019 + 179.15) / 1608.828)||/||((904.061 + 183.928) / 1528.084)|
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|
|=||(9.184 - 13.065||-||62.899)||/||1608.828|
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 -2.73 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