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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 -1.39. The lowest was -4.70. 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 * 0.6622||+||0.528 * 0.9958||+||0.404 * 1.0253||+||0.892 * 1.4319||+||0.115 * 0.5613|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9387||+||4.679 * -0.0747||-||0.327 * 1.0752|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $1,264 Mil.|
Revenue was 3833 + 4069 + 3841 + 4354 = $16,097 Mil.
Gross Profit was 891 + 987 + 883 + 1015 = $3,776 Mil.
Total Current Assets was $4,218 Mil.
Total Assets was $6,844 Mil.
Property, Plant and Equipment(Net PPE) was $963 Mil.
Depreciation, Depletion and Amortization(DDA) was $313 Mil.
Selling, General & Admin. Expense(SGA) was $3,441 Mil.
Total Current Liabilities was $2,893 Mil.
Long-Term Debt was $1,513 Mil.
Net Income was -84 + 29 + -190 + -109 = $-354 Mil.
Non Operating Income was 1 + 1 + -2 + 1 = $1 Mil.
Cash Flow from Operations was 121 + 197 + -88 + -74 = $156 Mil.
|Accounts Receivable was $1,333 Mil.
Revenue was 3485.673 + 2619.448 + 2418.619 + 2718.26 = $11,242 Mil.
Gross Profit was 787.291 + 632.743 + 546.269 + 659.697 = $2,626 Mil.
Total Current Assets was $4,396 Mil.
Total Assets was $7,477 Mil.
Property, Plant and Equipment(Net PPE) was $1,309 Mil.
Depreciation, Depletion and Amortization(DDA) was $209 Mil.
Selling, General & Admin. Expense(SGA) was $2,560 Mil.
Total Current Liabilities was $2,922 Mil.
Long-Term Debt was $1,555 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)|
|=||(1264 / 16097)||/||(1333 / 11242)|
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)|
|=||(987 / 11242)||/||(891 / 16097)|
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 - (4218 + 963) / 6844)||/||(1 - (4396 + 1309) / 7477)|
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))|
|=||(209 / (209 + 1309))||/||(313 / (313 + 963))|
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)|
|=||(3441 / 16097)||/||(2560 / 11242)|
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)|
|=||((1513 + 2893) / 6844)||/||((1555 + 2922) / 7477)|
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|
|=||(-354 - 1||-||156)||/||6844|
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 -2.81 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