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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 Office Depot Inc was 1.46. The lowest was -4.70. And the median was -2.44.
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 Office Depot 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 * 0.9811||+||0.528 * 1.0051||+||0.404 * 1.3314||+||0.892 * 0.9387||+||0.115 * 1.1907|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0039||+||4.679 * 0.0092||-||0.327 * 0.8845|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $687 Mil.|
Revenue was 2726 + 2836 + 3218 + 3544 = $12,324 Mil.
Gross Profit was 654 + 726 + 747 + 856 = $2,983 Mil.
Total Current Assets was $2,973 Mil.
Total Assets was $5,540 Mil.
Property, Plant and Equipment(Net PPE) was $601 Mil.
Depreciation, Depletion and Amortization(DDA) was $181 Mil.
Selling, General & Admin. Expense(SGA) was $2,583 Mil.
Total Current Liabilities was $2,031 Mil.
Long-Term Debt was $1,156 Mil.
Net Income was 229 + 44 + 210 + 46 = $529 Mil.
Non Operating Income was 0 + -14 + 0 + 0 = $-14 Mil.
Cash Flow from Operations was 45 + 299 + 287 + -139 = $492 Mil.
|Accounts Receivable was $746 Mil.
Revenue was 2766 + 3046 + 3440 + 3877 = $13,129 Mil.
Gross Profit was 656 + 787 + 814 + 937 = $3,194 Mil.
Total Current Assets was $4,060 Mil.
Total Assets was $6,442 Mil.
Property, Plant and Equipment(Net PPE) was $665 Mil.
Depreciation, Depletion and Amortization(DDA) was $253 Mil.
Selling, General & Admin. Expense(SGA) was $2,741 Mil.
Total Current Liabilities was $2,743 Mil.
Long-Term Debt was $1,447 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)|
|=||(687 / 12324)||/||(746 / 13129)|
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)|
|=||(3194 / 13129)||/||(2983 / 12324)|
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 - (2973 + 601) / 5540)||/||(1 - (4060 + 665) / 6442)|
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))|
|=||(253 / (253 + 665))||/||(181 / (181 + 601))|
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)|
|=||(2583 / 12324)||/||(2741 / 13129)|
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)|
|=||((1156 + 2031) / 5540)||/||((1447 + 2743) / 6442)|
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|
|=||(529 - -14||-||492)||/||5540|
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.
Office Depot Inc has a M-score of -2.31 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
Office Depot Inc Annual Data
Office Depot Inc Quarterly Data