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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 Otelco, Inc. was -2.20. The lowest was -8.81. And the median was -2.89.
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 Otelco, 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 * 0.9925||+||0.528 * 1.0347||+||0.404 * 1.0613||+||0.892 * 0.8983||+||0.115 * 1.177|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.055||+||4.679 * -0.1385||-||0.327 * 0.9667|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $3.47 Mil.|
Revenue was 18.421 + 18.488 + 18.782 + 19.338 = $75.03 Mil.
Gross Profit was 9.658 + 9.889 + 9.385 + 10.591 = $39.52 Mil.
Total Current Assets was $17.37 Mil.
Total Assets was $123.33 Mil.
Property, Plant and Equipment(Net PPE) was $51.95 Mil.
Depreciation, Depletion and Amortization(DDA) was $11.00 Mil.
Selling, General & Admin. Expense(SGA) was $11.08 Mil.
Total Current Liabilities was $16.75 Mil.
Long-Term Debt was $107.22 Mil.
Net Income was 1.387 + 1.308 + 1.394 + -0.202 = $3.89 Mil.
Non Operating Income was -0.306 + -0.077 + 0.654 + -0.035 = $0.24 Mil.
Cash Flow from Operations was 5.25 + 5.519 + 4.3 + 5.664 = $20.73 Mil.
|Accounts Receivable was $3.89 Mil.
Revenue was 18.98 + 19.666 + 20.988 + 23.888 = $83.52 Mil.
Gross Profit was 9.915 + 10.579 + 11.335 + 13.694 = $45.52 Mil.
Total Current Assets was $25.42 Mil.
Total Assets was $135.10 Mil.
Property, Plant and Equipment(Net PPE) was $53.94 Mil.
Depreciation, Depletion and Amortization(DDA) was $13.96 Mil.
Selling, General & Admin. Expense(SGA) was $11.69 Mil.
Total Current Liabilities was $15.85 Mil.
Long-Term Debt was $124.63 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)|
|=||(3.471 / 75.029)||/||(3.893 / 83.522)|
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)|
|=||(9.889 / 83.522)||/||(9.658 / 75.029)|
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 - (17.37 + 51.951) / 123.327)||/||(1 - (25.418 + 53.939) / 135.099)|
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))|
|=||(13.964 / (13.964 + 53.939))||/||(10.999 / (10.999 + 51.951))|
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)|
|=||(11.075 / 75.029)||/||(11.686 / 83.522)|
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)|
|=||((107.221 + 16.752) / 123.327)||/||((124.634 + 15.852) / 135.099)|
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|
|=||(3.887 - 0.236||-||20.733)||/||123.327|
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.
Otelco, Inc. has a M-score of -3.16 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
Otelco, Inc. Annual Data
Otelco, Inc. Quarterly Data