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GuruFocus has detected 3 Warning Signs with Resolute Forest Products Inc $RFP.
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Resolute Forest Products Inc (NYSE:RFP)
Beneish M-Score
-2.76 (As of Today)

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.

Resolute Forest Products Inc has a M-score of -2.76 suggests that the company is not a manipulator.

RFP' s Beneish M-Score Range Over the Past 10 Years
Min: -4   Max: -1.23
Current: -2.76

-4
-1.23

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 -2.71.


Definition

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 * 0.9764+0.528 * 0.9608+0.404 * 1.0284+0.892 * 0.9726+0.115 * 1.151
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9768+4.679 * -0.0395-0.327 * 1.1798
=-2.76

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $358 Mil.
Revenue was 889 + 888 + 891 + 877 = $3,545 Mil.
Gross Profit was 199 + 207 + 223 + 200 = $829 Mil.
Total Current Assets was $1,081 Mil.
Total Assets was $4,277 Mil.
Property, Plant and Equipment(Net PPE) was $1,842 Mil.
Depreciation, Depletion and Amortization(DDA) was $206 Mil.
Selling, General & Admin. Expense(SGA) was $589 Mil.
Total Current Liabilities was $467 Mil.
Long-Term Debt was $761 Mil.
Net Income was -45 + 14 + -42 + -8 = $-81 Mil.
Non Operating Income was -7 + 1 + 0 + 13 = $7 Mil.
Cash Flow from Operations was 30 + -18 + 63 + 6 = $81 Mil.
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.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(358 / 3545) / (377 / 3645)
=0.10098731 / 0.10342936
=0.9764

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(819 / 3645) / (829 / 3545)
=0.22469136 / 0.23385049
=0.9608

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (1081 + 1842) / 4277) / (1 - (1111 + 1810) / 4220)
=0.31657704 / 0.30781991
=1.0284

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=3545 / 3645
=0.9726

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))
=(237 / (237 + 1810)) / (206 / (206 + 1842))
=0.11577919 / 0.10058594
=1.151

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)
=(589 / 3545) / (620 / 3645)
=0.16614951 / 0.17009602
=0.9768

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)
=((761 + 467) / 4277) / ((590 + 437) / 4220)
=0.28711714 / 0.24336493
=1.1798

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-81 - 7 - 81) / 4277
=-0.0395

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.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Resolute Forest Products Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.54310.61951.2241.21990.68011.04530.93930.87760.98090.9764
GMI 1.38810.71941.02551.08810.87161.09280.99360.95171.0640.9608
AQI 1.45180.42291.48341.97341.11211.11030.79721.04661.03251.0284
SGI 1.0981.74690.64481.0871.00210.94680.99070.95450.8560.9726
DEPI 1.54050.46331.03680.85061.94630.92720.90830.87990.9421.151
SGAI 1.19760.93320.97550.95080.99370.99331.0461.02631.07620.9768
LVGI 1.1471.37640.30610.87730.75130.95181.22771.04311.07931.1798
TATA -0.0235-0.2362-0.1250.1066-0.0164-0.0453-0.1454-0.0773-0.0945-0.0395
M-score -1.64-3.82-2.73-1.23-2.68-2.60-3.40-3.03-3.07-2.76

Resolute Forest Products Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.76480.87760.86350.87640.90980.98091.06511.01281.14360.9764
GMI 0.93680.95170.91480.95110.9811.0641.08581.08511.0770.9608
AQI 0.9581.04660.96120.95160.99631.03251.16761.16281.15281.0284
SGI 0.98060.95450.94530.91110.87430.8560.86540.89240.93270.9726
DEPI 0.89640.87990.90310.93510.96420.9420.95530.9711.02331.151
SGAI 1.02431.02631.05011.06031.05961.07621.06081.04171.02620.9768
LVGI 1.11821.04311.02451.00770.99841.07931.09741.12111.19251.1798
TATA -0.0534-0.0773-0.095-0.0921-0.0721-0.0945-0.0837-0.0938-0.084-0.0395
M-score -3.07-3.03-3.19-3.17-3.04-3.07-2.87-2.94-2.76-2.76
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