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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 -0.96. The lowest was -4.41. And the median was -2.57.
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 * 1.1436||+||0.528 * 1.077||+||0.404 * 1.1528||+||0.892 * 0.9327||+||0.115 * 1.0233|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0262||+||4.679 * -0.084||-||0.327 * 1.1925|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $448 Mil.|
Revenue was 888 + 891 + 877 + 894 = $3,550 Mil.
Gross Profit was 207 + 223 + 200 + 165 = $795 Mil.
Total Current Assets was $1,109 Mil.
Total Assets was $4,312 Mil.
Property, Plant and Equipment(Net PPE) was $1,839 Mil.
Depreciation, Depletion and Amortization(DDA) was $218 Mil.
Selling, General & Admin. Expense(SGA) was $603 Mil.
Total Current Liabilities was $477 Mil.
Long-Term Debt was $726 Mil.
Net Income was 14 + -42 + -8 + -214 = $-250 Mil.
Non Operating Income was 1 + 0 + 13 + -1 = $13 Mil.
Cash Flow from Operations was -18 + 63 + 6 + 48 = $99 Mil.
|Accounts Receivable was $420 Mil.
Revenue was 905 + 926 + 920 + 1055 = $3,806 Mil.
Gross Profit was 218 + 234 + 202 + 264 = $918 Mil.
Total Current Assets was $1,368 Mil.
Total Assets was $4,548 Mil.
Property, Plant and Equipment(Net PPE) was $1,932 Mil.
Depreciation, Depletion and Amortization(DDA) was $235 Mil.
Selling, General & Admin. Expense(SGA) was $630 Mil.
Total Current Liabilities was $468 Mil.
Long-Term Debt was $596 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)|
|=||(448 / 3550)||/||(420 / 3806)|
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)|
|=||(918 / 3806)||/||(795 / 3550)|
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 - (1109 + 1839) / 4312)||/||(1 - (1368 + 1932) / 4548)|
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))|
|=||(235 / (235 + 1932))||/||(218 / (218 + 1839))|
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)|
|=||(603 / 3550)||/||(630 / 3806)|
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)|
|=||((726 + 477) / 4312)||/||((596 + 468) / 4548)|
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|
|=||(-250 - 13||-||99)||/||4312|
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 -2.76 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