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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 -2.53.
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 * 1.0128||+||0.528 * 1.0851||+||0.404 * 1.1628||+||0.892 * 0.8924||+||0.115 * 0.971|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0417||+||4.679 * -0.0938||-||0.327 * 1.1211|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $376 Mil.|
Revenue was 891 + 877 + 894 + 905 = $3,567 Mil.
Gross Profit was 223 + 200 + 165 + 218 = $806 Mil.
Total Current Assets was $1,086 Mil.
Total Assets was $4,245 Mil.
Property, Plant and Equipment(Net PPE) was $1,801 Mil.
Depreciation, Depletion and Amortization(DDA) was $226 Mil.
Selling, General & Admin. Expense(SGA) was $608 Mil.
Total Current Liabilities was $474 Mil.
Long-Term Debt was $610 Mil.
Net Income was -42 + -8 + -214 + -6 = $-270 Mil.
Non Operating Income was 0 + 13 + -1 + -1 = $11 Mil.
Cash Flow from Operations was 63 + 6 + 48 + 0 = $117 Mil.
|Accounts Receivable was $416 Mil.
Revenue was 926 + 920 + 1055 + 1096 = $3,997 Mil.
Gross Profit was 234 + 202 + 264 + 280 = $980 Mil.
Total Current Assets was $1,455 Mil.
Total Assets was $4,689 Mil.
Property, Plant and Equipment(Net PPE) was $1,944 Mil.
Depreciation, Depletion and Amortization(DDA) was $236 Mil.
Selling, General & Admin. Expense(SGA) was $654 Mil.
Total Current Liabilities was $472 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)|
|=||(376 / 3567)||/||(416 / 3997)|
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)|
|=||(980 / 3997)||/||(806 / 3567)|
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 - (1086 + 1801) / 4245)||/||(1 - (1455 + 1944) / 4689)|
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))|
|=||(236 / (236 + 1944))||/||(226 / (226 + 1801))|
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)|
|=||(608 / 3567)||/||(654 / 3997)|
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)|
|=||((610 + 474) / 4245)||/||((596 + 472) / 4689)|
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|
|=||(-270 - 11||-||117)||/||4245|
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 -2.94 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