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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 * 1.4331||+||0.528 * 1.1733||+||0.404 * 1.6263||+||0.892 * 1.2083||+||0.115 * 0.8563|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8713||+||4.679 * -0.055||-||0.327 * 0.9671|
|This Year (May16) TTM:||Last Year (May15) TTM:|
|Accounts Receivable was $1,679 Mil.|
Revenue was 8184.181 + 8270.136 + 8154.184 + 7664.776 = $32,273 Mil.
Gross Profit was 1894.3 + 2041.556 + 2002.879 + 1922.291 = $7,861 Mil.
Total Current Assets was $4,555 Mil.
Total Assets was $11,255 Mil.
Property, Plant and Equipment(Net PPE) was $2,258 Mil.
Depreciation, Depletion and Amortization(DDA) was $538 Mil.
Selling, General & Admin. Expense(SGA) was $7,107 Mil.
Total Current Liabilities was $2,980 Mil.
Long-Term Debt was $6,949 Mil.
Net Income was -4.588 + 65.617 + 59.543 + 21.469 = $142 Mil.
Non Operating Income was -6.837 + 22.018 + -10.342 + -33.486 = $-29 Mil.
Cash Flow from Operations was 159.944 + 327.865 + 327.965 + -26.263 = $790 Mil.
|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.
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)|
|=||(1679.166 / 32273.277)||/||(969.725 / 26710.407)|
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)|
|=||(7633.283 / 26710.407)||/||(7861.026 / 32273.277)|
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 - (4555.185 + 2257.795) / 11254.947)||/||(1 - (5830.847 + 2143.575) / 10529.774)|
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))|
|=||(423.172 / (423.172 + 2143.575))||/||(538.351 / (538.351 + 2257.795))|
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)|
|=||(7107.008 / 32273.277)||/||(6750.873 / 26710.407)|
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)|
|=||((6948.762 + 2979.769) / 11254.947)||/||((7199.832 + 2404.967) / 10529.774)|
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|
|=||(142.041 - -28.647||-||789.511)||/||11254.947|
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 -1.79 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