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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 Resolute Forest Products Inc was -1.23. The lowest was -4.00. 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 Resolute Forest Products Inc 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 * 0.9809||+||0.528 * 1.064||+||0.404 * 1.0325||+||0.892 * 0.856||+||0.115 * 0.942|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0762||+||4.679 * -0.0945||-||0.327 * 1.0793|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $377 Mil.|
Revenue was 894 + 905 + 926 + 920 = $3,645 Mil.
Gross Profit was 165 + 218 + 234 + 202 = $819 Mil.
Total Current Assets was $1,111 Mil.
Total Assets was $4,220 Mil.
Property, Plant and Equipment(Net PPE) was $1,810 Mil.
Depreciation, Depletion and Amortization(DDA) was $237 Mil.
Selling, General & Admin. Expense(SGA) was $620 Mil.
Total Current Liabilities was $437 Mil.
Long-Term Debt was $590 Mil.
Net Income was -214 + -6 + -4 + -33 = $-257 Mil.
Non Operating Income was -1 + -1 + 1 + 5 = $4 Mil.
Cash Flow from Operations was 48 + 0 + 61 + 29 = $138 Mil.
|Accounts Receivable was $449 Mil.
Revenue was 1055 + 1096 + 1091 + 1016 = $4,258 Mil.
Gross Profit was 264 + 280 + 279 + 195 = $1,018 Mil.
Total Current Assets was $1,464 Mil.
Total Assets was $4,914 Mil.
Property, Plant and Equipment(Net PPE) was $1,985 Mil.
Depreciation, Depletion and Amortization(DDA) was $243 Mil.
Selling, General & Admin. Expense(SGA) was $673 Mil.
Total Current Liabilities was $519 Mil.
Long-Term Debt was $589 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)|
|=||(377 / 3645)||/||(449 / 4258)|
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)|
|=||(218 / 4258)||/||(165 / 3645)|
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 - (1111 + 1810) / 4220)||/||(1 - (1464 + 1985) / 4914)|
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))|
|=||(243 / (243 + 1985))||/||(237 / (237 + 1810))|
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)|
|=||(620 / 3645)||/||(673 / 4258)|
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)|
|=||((590 + 437) / 4220)||/||((589 + 519) / 4914)|
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|
|=||(-257 - 4||-||138)||/||4220|
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.
Resolute Forest Products Inc has a M-score of -3.07 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
Resolute Forest Products Inc Annual Data
Resolute Forest Products Inc Quarterly Data