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Beneish M-Score -0.34 higher than -2.22, which implies that it might have manipulated its financial results.
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 Rite Aid Corp was 0.04. The lowest was -4.85. And the median was -2.74.
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 Rite Aid Corp 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 * 1.3991||+||0.528 * 1.0818||+||0.404 * 3.7331||+||0.892 * 1.1156||+||0.115 * 0.9486|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9269||+||4.679 * 0.0949||-||0.327 * 0.785|
|This Year (Nov15) TTM:||Last Year (Nov14) TTM:|
|Accounts Receivable was $1,555 Mil.|
Revenue was 8154.184 + 7664.776 + 6647.561 + 6847.929 = $29,314 Mil.
Gross Profit was 2002.879 + 1922.291 + 1859.53 + 1955.861 = $7,741 Mil.
Total Current Assets was $4,805 Mil.
Total Assets was $11,718 Mil.
Property, Plant and Equipment(Net PPE) was $2,264 Mil.
Depreciation, Depletion and Amortization(DDA) was $481 Mil.
Selling, General & Admin. Expense(SGA) was $6,921 Mil.
Total Current Liabilities was $3,163 Mil.
Long-Term Debt was $7,338 Mil.
Net Income was 59.543 + 21.469 + 18.836 + 1835.032 = $1,935 Mil.
Non Operating Income was -10.342 + -33.486 + -0.039 + 21.92 = $-22 Mil.
Cash Flow from Operations was 327.965 + -26.263 + 367.835 + 175 = $845 Mil.
|Accounts Receivable was $997 Mil.
Revenue was 6692.333 + 6522.584 + 6465.531 + 6597.459 = $26,278 Mil.
Gross Profit was 1923.313 + 1894.579 + 1802.979 + 1885.716 = $7,507 Mil.
Total Current Assets was $4,360 Mil.
Total Assets was $7,186 Mil.
Property, Plant and Equipment(Net PPE) was $2,062 Mil.
Depreciation, Depletion and Amortization(DDA) was $411 Mil.
Selling, General & Admin. Expense(SGA) was $6,694 Mil.
Total Current Liabilities was $2,465 Mil.
Long-Term Debt was $5,739 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)|
|=||(1555.352 / 29314.45)||/||(996.545 / 26277.907)|
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)|
|=||(1922.291 / 26277.907)||/||(2002.879 / 29314.45)|
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 - (4805.167 + 2264.251) / 11718.08)||/||(1 - (4359.967 + 2062.376) / 7185.986)|
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))|
|=||(411.263 / (411.263 + 2062.376))||/||(481.207 / (481.207 + 2264.251))|
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)|
|=||(6921.385 / 29314.45)||/||(6693.986 / 26277.907)|
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)|
|=||((7338.345 + 3162.997) / 11718.08)||/||((5739.074 + 2464.674) / 7185.986)|
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|
|=||(1934.88 - -21.947||-||844.537)||/||11718.08|
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.
Rite Aid Corp has a M-score of -0.34 signals that the company is likely to 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
Rite Aid Corp Annual Data
Rite Aid Corp Quarterly Data