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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 -5.88. And the median was -2.45.
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 * 1.1088||+||0.528 * 1.0011||+||0.404 * 0.5903||+||0.892 * 0.9135||+||0.115 * 1.116|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0451||+||4.679 * -0.0747||-||0.327 * 0.9145|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $137 Mil.|
Revenue was 253.843 + 237.828 + 270.893 + 266.936 = $1,030 Mil.
Gross Profit was 39.869 + 54.878 + 56.497 + 45.25 = $196 Mil.
Total Current Assets was $416 Mil.
Total Assets was $1,238 Mil.
Property, Plant and Equipment(Net PPE) was $792 Mil.
Depreciation, Depletion and Amortization(DDA) was $68 Mil.
Selling, General & Admin. Expense(SGA) was $47 Mil.
Total Current Liabilities was $123 Mil.
Long-Term Debt was $628 Mil.
Net Income was 8.769 + 21.696 + 23.76 + 16.412 = $71 Mil.
Non Operating Income was 0.059 + -1.542 + -0.418 + 2.266 = $0 Mil.
Cash Flow from Operations was 63.466 + 17.251 + 71.69 + 10.434 = $163 Mil.
|Accounts Receivable was $136 Mil.
Revenue was 257.547 + 282.625 + 301.61 + 285.192 = $1,127 Mil.
Gross Profit was 55.295 + 65.622 + 59.465 + 34.959 = $215 Mil.
Total Current Assets was $403 Mil.
Total Assets was $1,234 Mil.
Property, Plant and Equipment(Net PPE) was $779 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $49 Mil.
Total Current Liabilities was $131 Mil.
Long-Term Debt was $687 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)|
|=||(137.344 / 1029.5)||/||(135.6 / 1126.974)|
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)|
|=||(54.878 / 1126.974)||/||(39.869 / 1029.5)|
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 - (415.994 + 791.893) / 1238.464)||/||(1 - (402.847 + 779.211) / 1233.652)|
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))|
|=||(75.612 / (75.612 + 779.211))||/||(68.165 / (68.165 + 791.893))|
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)|
|=||(46.641 / 1029.5)||/||(48.855 / 1126.974)|
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)|
|=||((628.27 + 123.08) / 1238.464)||/||((687.207 + 131.191) / 1233.652)|
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|
|=||(70.637 - 0.365||-||162.841)||/||1238.464|
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 -2.94 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