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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 -1.85. The lowest was -8.79. And the median was -2.96.
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 * 0.4903||+||0.528 * 0.9777||+||0.404 * 0.9911||+||0.892 * 0.9744||+||0.115 * 1.0677|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9319||+||4.679 * -0.1096||-||0.327 * 0.9184|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $3.42 Mil.|
Revenue was 17.232 + 17.49 + 17.717 + 17.85 = $70.29 Mil.
Gross Profit was 9.357 + 9.359 + 9.558 + 9.549 = $37.82 Mil.
Total Current Assets was $18.60 Mil.
Total Assets was $115.99 Mil.
Property, Plant and Equipment(Net PPE) was $48.27 Mil.
Depreciation, Depletion and Amortization(DDA) was $8.45 Mil.
Selling, General & Admin. Expense(SGA) was $9.74 Mil.
Total Current Liabilities was $10.96 Mil.
Long-Term Debt was $91.25 Mil.
Net Income was 1.324 + 1.75 + 1.844 + 1.85 = $6.77 Mil.
Non Operating Income was 0.004 + 0.619 + 0.007 + 0.014 = $0.64 Mil.
Cash Flow from Operations was 3.893 + 5.791 + 5.489 + 3.669 = $18.84 Mil.
|Accounts Receivable was $7.16 Mil.
Revenue was 17.892 + 17.643 + 18.178 + 18.421 = $72.13 Mil.
Gross Profit was 9.486 + 9.386 + 9.422 + 9.658 = $37.95 Mil.
Total Current Assets was $17.64 Mil.
Total Assets was $118.49 Mil.
Property, Plant and Equipment(Net PPE) was $50.23 Mil.
Depreciation, Depletion and Amortization(DDA) was $9.50 Mil.
Selling, General & Admin. Expense(SGA) was $10.73 Mil.
Total Current Liabilities was $113.69 Mil.
Long-Term Debt was $0.00 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)|
|=||(3.423 / 70.289)||/||(7.164 / 72.134)|
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)|
|=||(37.952 / 72.134)||/||(37.823 / 70.289)|
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 - (18.604 + 48.274) / 115.994)||/||(1 - (17.637 + 50.226) / 118.488)|
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))|
|=||(9.504 / (9.504 + 50.226))||/||(8.454 / (8.454 + 48.274))|
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)|
|=||(9.743 / 70.289)||/||(10.729 / 72.134)|
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)|
|=||((91.254 + 10.963) / 115.994)||/||((0 + 113.688) / 118.488)|
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|
|=||(6.768 - 0.644||-||18.842)||/||115.994|
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 -3.45 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