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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 -0.40. The lowest was -5.36. And the median was -2.72.
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 * 0.8432||+||0.528 * 0.9731||+||0.404 * 1.0596||+||0.892 * 1.0643||+||0.115 * 0.7342|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8954||+||4.679 * -0.0401||-||0.327 * 1.0038|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $1,172 Mil.|
Revenue was 3440 + 3877 + 3833 + 4069 = $15,219 Mil.
Gross Profit was 814 + 937 + 891 + 987 = $3,629 Mil.
Total Current Assets was $3,878 Mil.
Total Assets was $6,360 Mil.
Property, Plant and Equipment(Net PPE) was $842 Mil.
Depreciation, Depletion and Amortization(DDA) was $308 Mil.
Selling, General & Admin. Expense(SGA) was $3,097 Mil.
Total Current Liabilities was $2,511 Mil.
Long-Term Debt was $1,477 Mil.
Net Income was -58 + 45 + -84 + 29 = $-68 Mil.
Non Operating Income was 1 + 1 + 1 + 1 = $4 Mil.
Cash Flow from Operations was -89 + -46 + 121 + 197 = $183 Mil.
|Accounts Receivable was $1,306 Mil.
Revenue was 3841 + 4354 + 3486 + 2619 = $14,300 Mil.
Gross Profit was 883 + 1015 + 787 + 633 = $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 $3,250 Mil.
Total Current Liabilities was $2,822 Mil.
Long-Term Debt was $1,534 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)|
|=||(1172 / 15219)||/||(1306 / 14300)|
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)|
|=||(937 / 14300)||/||(814 / 15219)|
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 - (3878 + 842) / 6360)||/||(1 - (4181 + 1095) / 6973)|
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))|
|=||(268 / (268 + 1095))||/||(308 / (308 + 842))|
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)|
|=||(3097 / 15219)||/||(3250 / 14300)|
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)|
|=||((1477 + 2511) / 6360)||/||((1534 + 2822) / 6973)|
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|
|=||(-68 - 4||-||183)||/||6360|
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 -2.76 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