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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 -1.70 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Office Depot Inc was -1.40. The lowest was -5.36. And the median was -2.70.
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 * 1.2785||+||0.528 * 1.1645||+||0.404 * 1.9702||+||0.892 * 1.3681||+||0.115 * 0.9973|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8605||+||4.679 * -0.0666||-||0.327 * 0.9824|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $1,306 Mil.|
Revenue was 3841 + 4354 + 3485.673 + 2619.448 = $14,300 Mil.
Gross Profit was 883 + 1015 + 787.291 + 632.743 = $3,318 Mil.
Total Current Assets was $4,181 Mil.
Total Assets was $6,973 Mil.
Property, Plant and Equipment(Net PPE) was $1,095 Mil.
Depreciation, Depletion and Amortization(DDA) was $268 Mil.
Selling, General & Admin. Expense(SGA) was $3,246 Mil.
Total Current Liabilities was $2,822 Mil.
Long-Term Debt was $1,534 Mil.
Net Income was -190 + -109 + -120.039 + 160.9 = $-258 Mil.
Non Operating Income was -2 + 1 + 0.267 + 382.131 = $381 Mil.
Cash Flow from Operations was -88 + -74 + 12.797 + -25.797 = $-175 Mil.
|Accounts Receivable was $747 Mil.
Revenue was 2419 + 2718 + 2622.76 + 2692.933 = $10,453 Mil.
Gross Profit was 546 + 660 + 783.623 + 834.724 = $2,824 Mil.
Total Current Assets was $2,475 Mil.
Total Assets was $3,748 Mil.
Property, Plant and Equipment(Net PPE) was $810 Mil.
Depreciation, Depletion and Amortization(DDA) was $198 Mil.
Selling, General & Admin. Expense(SGA) was $2,757 Mil.
Total Current Liabilities was $1,908 Mil.
Long-Term Debt was $475 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)|
|=||(1306 / 14300.121)||/||(746.645 / 10452.693)|
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)|
|=||(1015 / 10452.693)||/||(883 / 14300.121)|
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 - (4181 + 1095) / 6973)||/||(1 - (2474.684 + 809.965) / 3747.565)|
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))|
|=||(197.567 / (197.567 + 809.965))||/||(268 / (268 + 1095))|
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)|
|=||(3246.033 / 14300.121)||/||(2757.446 / 10452.693)|
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)|
|=||((1534 + 2822) / 6973)||/||((475.004 + 1908.074) / 3747.565)|
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|
|=||(-258.139 - 381.398||-||-175)||/||6973|
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 -1.70 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