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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.
Office Depot Inc has a M-score of -1.76 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Office Depot Inc was -1.58. The lowest was -5.36. And the median was -2.71.
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 * 1.4072||+||0.528 * 1.0251||+||0.404 * 1.9201||+||0.892 * 1.2217||+||0.115 * 1.1605|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9805||+||4.679 * -0.0576||-||0.327 * 0.9711|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $1,312 Mil.|
Revenue was 4354 + 3485.673 + 2619.448 + 2418.619 = $12,878 Mil.
Gross Profit was 1015 + 787.291 + 632.743 + 546.269 = $2,981 Mil.
Total Current Assets was $4,245 Mil.
Total Assets was $7,111 Mil.
Property, Plant and Equipment(Net PPE) was $1,161 Mil.
Depreciation, Depletion and Amortization(DDA) was $237 Mil.
Selling, General & Admin. Expense(SGA) was $2,873 Mil.
Total Current Liabilities was $2,721 Mil.
Long-Term Debt was $1,539 Mil.
Net Income was -109 + -120.039 + 160.9 + -54.206 = $-122 Mil.
Non Operating Income was 1 + 0.267 + 382.131 + -9.395 = $374 Mil.
Cash Flow from Operations was -74 + 12.797 + -25.561 + -0.236 = $-87 Mil.
|Accounts Receivable was $763 Mil.
Revenue was 2718 + 2623.108 + 2692.933 + 2507.15 = $10,541 Mil.
Gross Profit was 660 + 606.729 + 662.672 + 572.196 = $2,502 Mil.
Total Current Assets was $2,497 Mil.
Total Assets was $3,792 Mil.
Property, Plant and Equipment(Net PPE) was $821 Mil.
Depreciation, Depletion and Amortization(DDA) was $201 Mil.
Selling, General & Admin. Expense(SGA) was $2,399 Mil.
Total Current Liabilities was $1,859 Mil.
Long-Term Debt was $480 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)|
|=||(1312 / 12877.74)||/||(763.2 / 10541.191)|
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)|
|=||(787.291 / 10541.191)||/||(1015 / 12877.74)|
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 - (4245 + 1161) / 7111)||/||(1 - (2497.11 + 821.053) / 3791.647)|
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))|
|=||(201.098 / (201.098 + 821.053))||/||(237 / (237 + 1161))|
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)|
|=||(2873.376 / 12877.74)||/||(2398.867 / 10541.191)|
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)|
|=||((1539 + 2721) / 7111)||/||((479.82 + 1859.328) / 3791.647)|
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|
|=||(-122.345 - 374.003||-||-87)||/||7111|
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 -1.76 signals that the company is likely to 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