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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 -0.34. 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 * 1.0164||+||0.528 * 0.9797||+||0.404 * 1.0405||+||0.892 * 0.906||+||0.115 * 0.9986|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9973||+||4.679 * -0.004||-||0.327 * 0.9856|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $1,106 Mil.|
Revenue was 3544 + 3478 + 3690 + 3440 = $14,152 Mil.
Gross Profit was 856 + 814 + 936 + 814 = $3,420 Mil.
Total Current Assets was $3,696 Mil.
Total Assets was $6,034 Mil.
Property, Plant and Equipment(Net PPE) was $754 Mil.
Depreciation, Depletion and Amortization(DDA) was $264 Mil.
Selling, General & Admin. Expense(SGA) was $2,981 Mil.
Total Current Liabilities was $2,315 Mil.
Long-Term Debt was $1,437 Mil.
Net Income was 46 + 15 + 6 + -58 = $9 Mil.
Non Operating Income was 0 + 0 + -1 + 1 = $0 Mil.
Cash Flow from Operations was -139 + 126 + 135 + -89 = $33 Mil.
|Accounts Receivable was $1,201 Mil.
Revenue was 3877 + 3833 + 4069 + 3841 = $15,620 Mil.
Gross Profit was 937 + 891 + 987 + 883 = $3,698 Mil.
Total Current Assets was $4,009 Mil.
Total Assets was $6,548 Mil.
Property, Plant and Equipment(Net PPE) was $887 Mil.
Depreciation, Depletion and Amortization(DDA) was $310 Mil.
Selling, General & Admin. Expense(SGA) was $3,299 Mil.
Total Current Liabilities was $2,639 Mil.
Long-Term Debt was $1,492 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)|
|=||(1106 / 14152)||/||(1201 / 15620)|
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)|
|=||(3698 / 15620)||/||(3420 / 14152)|
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 - (3696 + 754) / 6034)||/||(1 - (4009 + 887) / 6548)|
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))|
|=||(310 / (310 + 887))||/||(264 / (264 + 754))|
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)|
|=||(2981 / 14152)||/||(3299 / 15620)|
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)|
|=||((1437 + 2315) / 6034)||/||((1492 + 2639) / 6548)|
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|
|=||(9 - 0||-||33)||/||6034|
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 -2.56 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