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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 * 0.9881||+||0.528 * 1.1102||+||0.404 * 0.9406||+||0.892 * 1.1112||+||0.115 * 0.8931|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9304||+||4.679 * -0.0339||-||0.327 * 0.9881|
|This Year (Nov16) TTM:||Last Year (Nov15) TTM:|
|Accounts Receivable was $1,708 Mil.|
Revenue was 8089.726 + 8029.806 + 8184.181 + 8270.136 = $32,574 Mil.
Gross Profit was 1894.86 + 1916.743 + 1894.3 + 2041.556 = $7,747 Mil.
Total Current Assets was $5,017 Mil.
Total Assets was $11,659 Mil.
Property, Plant and Equipment(Net PPE) was $2,291 Mil.
Depreciation, Depletion and Amortization(DDA) was $560 Mil.
Selling, General & Admin. Expense(SGA) was $7,156 Mil.
Total Current Liabilities was $3,072 Mil.
Long-Term Debt was $7,252 Mil.
Net Income was 15.01 + 14.773 + -4.588 + 65.617 = $91 Mil.
Non Operating Income was -0.501 + -0.174 + -6.837 + 0.348 = $-7 Mil.
Cash Flow from Operations was 152.587 + -147.078 + 159.944 + 327.865 = $493 Mil.
|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.
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)|
|=||(1707.648 / 32573.849)||/||(1555.352 / 29314.45)|
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)|
|=||(7740.561 / 29314.45)||/||(7747.459 / 32573.849)|
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 - (5017.168 + 2291.459) / 11658.926)||/||(1 - (4805.167 + 2264.251) / 11718.08)|
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))|
|=||(481.207 / (481.207 + 2264.251))||/||(559.514 / (559.514 + 2291.459))|
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)|
|=||(7155.644 / 32573.849)||/||(6921.385 / 29314.45)|
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)|
|=||((7252.229 + 3071.538) / 11658.926)||/||((7338.345 + 3162.997) / 11718.08)|
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|
|=||(90.812 - -7.164||-||493.318)||/||11658.926|
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 -2.51 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