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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 0.04. The lowest was -4.85. And the median was -2.75.
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 * 0.8332||+||0.528 * 1.1428||+||0.404 * 0.9653||+||0.892 * 1.1718||+||0.115 * 0.8702|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8937||+||4.679 * -0.0463||-||0.327 * 0.9813|
|This Year (Aug16) TTM:||Last Year (Aug15) TTM:|
|Accounts Receivable was $1,829 Mil.|
Revenue was 8029.806 + 8184.181 + 8270.136 + 8154.184 = $32,638 Mil.
Gross Profit was 1916.743 + 1894.3 + 2041.556 + 2002.879 = $7,855 Mil.
Total Current Assets was $4,939 Mil.
Total Assets was $11,611 Mil.
Property, Plant and Equipment(Net PPE) was $2,281 Mil.
Depreciation, Depletion and Amortization(DDA) was $553 Mil.
Selling, General & Admin. Expense(SGA) was $7,159 Mil.
Total Current Liabilities was $3,052 Mil.
Long-Term Debt was $7,220 Mil.
Net Income was 14.773 + -4.588 + 65.617 + 59.543 = $135 Mil.
Non Operating Income was -0.174 + -6.837 + 22.018 + -10.342 = $5 Mil.
Cash Flow from Operations was -147.078 + 159.944 + 327.865 + 327.965 = $669 Mil.
|Accounts Receivable was $1,873 Mil.
Revenue was 7664.776 + 6647.561 + 6847.929 + 6692.333 = $27,853 Mil.
Gross Profit was 1922.291 + 1859.53 + 1955.861 + 1923.313 = $7,661 Mil.
Total Current Assets was $5,087 Mil.
Total Assets was $11,979 Mil.
Property, Plant and Equipment(Net PPE) was $2,199 Mil.
Depreciation, Depletion and Amortization(DDA) was $449 Mil.
Selling, General & Admin. Expense(SGA) was $6,836 Mil.
Total Current Liabilities was $3,385 Mil.
Long-Term Debt was $7,415 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)|
|=||(1828.641 / 32638.307)||/||(1872.976 / 27852.599)|
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)|
|=||(7660.995 / 27852.599)||/||(7855.478 / 32638.307)|
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 - (4938.516 + 2281.392) / 11610.969)||/||(1 - (5087.134 + 2198.674) / 11979.231)|
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))|
|=||(449.387 / (449.387 + 2198.674))||/||(552.703 / (552.703 + 2281.392))|
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)|
|=||(7159.429 / 32638.307)||/||(6836.175 / 27852.599)|
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)|
|=||((7220.297 + 3051.946) / 11610.969)||/||((7415.311 + 3384.58) / 11979.231)|
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|
|=||(135.345 - 4.665||-||668.696)||/||11610.969|
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 -2.63 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
Rite Aid Corp Annual Data
Rite Aid Corp Quarterly Data