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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 -0.17. The lowest was -4.63. And the median was -2.68.
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 * 1.4087||+||0.528 * 1.1217||+||0.404 * 1.4121||+||0.892 * 1.1586||+||0.115 * 0.9019|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.904||+||4.679 * -0.0675||-||0.327 * 0.9763|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Feb16) TTM:||Last Year (Feb15) TTM:|
|Accounts Receivable was $1,601 Mil.|
Revenue was 8270.136 + 8154.184 + 7664.776 + 6647.561 = $30,737 Mil.
Gross Profit was 2041.555 + 2002.879 + 1922.291 + 1859.53 = $7,826 Mil.
Total Current Assets was $4,551 Mil.
Total Assets was $11,277 Mil.
Property, Plant and Equipment(Net PPE) was $2,255 Mil.
Depreciation, Depletion and Amortization(DDA) was $509 Mil.
Selling, General & Admin. Expense(SGA) was $7,013 Mil.
Total Current Liabilities was $2,997 Mil.
Long-Term Debt was $6,967 Mil.
Net Income was 65.617 + 59.543 + 21.469 + 18.836 = $165 Mil.
Non Operating Income was -26.405 + -10.342 + -33.486 + -0.039 = $-70 Mil.
Cash Flow from Operations was 327.865 + 327.965 + -26.263 + 367.835 = $997 Mil.
|Accounts Receivable was $981 Mil.
Revenue was 6847.929 + 6692.333 + 6522.584 + 6465.531 = $26,528 Mil.
Gross Profit was 1955.861 + 1923.313 + 1894.579 + 1802.979 = $7,577 Mil.
Total Current Assets was $4,222 Mil.
Total Assets was $8,777 Mil.
Property, Plant and Equipment(Net PPE) was $2,091 Mil.
Depreciation, Depletion and Amortization(DDA) was $417 Mil.
Selling, General & Admin. Expense(SGA) was $6,696 Mil.
Total Current Liabilities was $2,485 Mil.
Long-Term Debt was $5,459 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)|
|=||(1601.008 / 30736.657)||/||(980.904 / 26528.377)|
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)|
|=||(7576.732 / 26528.377)||/||(7826.255 / 30736.657)|
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 - (4550.727 + 2255.398) / 11277.01)||/||(1 - (4221.758 + 2091.369) / 8777.425)|
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))|
|=||(416.628 / (416.628 + 2091.369))||/||(509.212 / (509.212 + 2255.398))|
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)|
|=||(7013.346 / 30736.657)||/||(6695.642 / 26528.377)|
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)|
|=||((6967.288 + 2996.895) / 11277.01)||/||((5458.74 + 2485) / 8777.425)|
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|
|=||(165.465 - -70.272||-||997.402)||/||11277.01|
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 -2.03 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