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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 Rite Aid Corp was 0.51. The lowest was -4.96. 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 * 1.0246||+||0.528 * 0.9948||+||0.404 * 2.1786||+||0.892 * 1.0394||+||0.115 * 1.0338|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9847||+||4.679 * 0.1247||-||0.327 * 0.7777|
|This Year (May15) TTM:||Last Year (May14) TTM:|
|Accounts Receivable was $970 Mil.|
Revenue was 6647.561 + 6847.929 + 6692.333 + 6522.584 = $26,710 Mil.
Gross Profit was 1859.53 + 1955.861 + 1923.313 + 1894.579 = $7,633 Mil.
Total Current Assets was $5,831 Mil.
Total Assets was $10,530 Mil.
Property, Plant and Equipment(Net PPE) was $2,144 Mil.
Depreciation, Depletion and Amortization(DDA) was $423 Mil.
Selling, General & Admin. Expense(SGA) was $6,751 Mil.
Total Current Liabilities was $2,405 Mil.
Long-Term Debt was $7,200 Mil.
Net Income was 18.836 + 1835.032 + 104.846 + 127.849 = $2,087 Mil.
Non Operating Income was -0.039 + 21.92 + -26.759 + 1.715 = $-3 Mil.
Cash Flow from Operations was 367.835 + 175 + 111.728 + 122.483 = $777 Mil.
|Accounts Receivable was $911 Mil.
Revenue was 6465.531 + 6597.459 + 6357.732 + 6278.165 = $25,699 Mil.
Gross Profit was 1802.979 + 1885.716 + 1800.666 + 1816.361 = $7,306 Mil.
Total Current Assets was $4,199 Mil.
Total Assets was $6,947 Mil.
Property, Plant and Equipment(Net PPE) was $1,974 Mil.
Depreciation, Depletion and Amortization(DDA) was $406 Mil.
Selling, General & Admin. Expense(SGA) was $6,596 Mil.
Total Current Liabilities was $2,556 Mil.
Long-Term Debt was $5,592 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)|
|=||(969.725 / 26710.407)||/||(910.624 / 25698.887)|
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)|
|=||(1955.861 / 25698.887)||/||(1859.53 / 26710.407)|
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 - (5830.847 + 2143.575) / 10529.774)||/||(1 - (4198.536 + 1974.204) / 6946.517)|
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))|
|=||(405.6 / (405.6 + 1974.204))||/||(423.172 / (423.172 + 2143.575))|
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)|
|=||(6750.873 / 26710.407)||/||(6596.255 / 25698.887)|
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)|
|=||((7199.832 + 2404.967) / 10529.774)||/||((5591.568 + 2555.531) / 6946.517)|
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|
|=||(2086.563 - -3.163||-||777.046)||/||10529.774|
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 -1.29 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