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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 -2.01. The lowest was -7.29. And the median was -2.88.
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 * 0.9779||+||0.528 * 0.972||+||0.404 * 0.9897||+||0.892 * 0.9625||+||0.115 * 1.1317|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9374||+||4.679 * -0.1231||-||0.327 * 0.9165|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $6.91 Mil.|
Revenue was 17.717 + 17.85 + 17.892 + 17.643 = $71.10 Mil.
Gross Profit was 9.558 + 9.549 + 9.486 + 9.386 = $37.98 Mil.
Total Current Assets was $18.53 Mil.
Total Assets was $118.58 Mil.
Property, Plant and Equipment(Net PPE) was $49.81 Mil.
Depreciation, Depletion and Amortization(DDA) was $8.88 Mil.
Selling, General & Admin. Expense(SGA) was $9.85 Mil.
Total Current Liabilities was $10.87 Mil.
Long-Term Debt was $97.05 Mil.
Net Income was 1.844 + 1.85 + 1.655 + 2.135 = $7.48 Mil.
Non Operating Income was 0.007 + 0.014 + -0.017 + 1.064 = $1.07 Mil.
Cash Flow from Operations was 5.489 + 3.669 + 5.069 + 6.786 = $21.01 Mil.
|Accounts Receivable was $7.34 Mil.
Revenue was 18.178 + 18.421 + 18.488 + 18.782 = $73.87 Mil.
Gross Profit was 9.422 + 9.658 + 9.889 + 9.385 = $38.35 Mil.
Total Current Assets was $17.78 Mil.
Total Assets was $120.67 Mil.
Property, Plant and Equipment(Net PPE) was $51.24 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.58 Mil.
Selling, General & Admin. Expense(SGA) was $10.91 Mil.
Total Current Liabilities was $14.36 Mil.
Long-Term Debt was $105.47 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)|
|=||(6.907 / 71.102)||/||(7.338 / 73.869)|
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)|
|=||(9.549 / 73.869)||/||(9.558 / 71.102)|
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 - (18.529 + 49.811) / 118.581)||/||(1 - (17.776 + 51.237) / 120.669)|
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))|
|=||(10.583 / (10.583 + 51.237))||/||(8.878 / (8.878 + 49.811))|
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)|
|=||(9.847 / 71.102)||/||(10.913 / 73.869)|
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)|
|=||((97.052 + 10.871) / 118.581)||/||((105.47 + 14.356) / 120.669)|
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|
|=||(7.484 - 1.068||-||21.013)||/||118.581|
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 -3.08 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