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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 RR Donnelley & Sons Co was -1.18. The lowest was -3.78. And the median was -2.89.
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 RR Donnelley & Sons Co 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 * 0.8924||+||0.528 * 1.0088||+||0.404 * 1.05||+||0.892 * 1.0999||+||0.115 * 0.8364|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0779||+||4.679 * -0.0634||-||0.327 * 0.9882|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $1,982 Mil.|
Revenue was 2746.1 + 3069.3 + 2957.8 + 2902.5 = $11,676 Mil.
Gross Profit was 579.7 + 667.6 + 647.6 + 662.2 = $2,557 Mil.
Total Current Assets was $3,044 Mil.
Total Assets was $7,205 Mil.
Property, Plant and Equipment(Net PPE) was $1,456 Mil.
Depreciation, Depletion and Amortization(DDA) was $472 Mil.
Selling, General & Admin. Expense(SGA) was $1,441 Mil.
Total Current Liabilities was $2,031 Mil.
Long-Term Debt was $3,431 Mil.
Net Income was 22.3 + 19.5 + 62.2 + 64.7 = $169 Mil.
Non Operating Income was -28.3 + -0.7 + -2 + -2.3 = $-33 Mil.
Cash Flow from Operations was -144.3 + 468.8 + 184.2 + 150.1 = $659 Mil.
|Accounts Receivable was $2,019 Mil.
Revenue was 2673.8 + 2755.3 + 2614.9 + 2571.6 = $10,616 Mil.
Gross Profit was 573.2 + 603.6 + 570.4 + 598.2 = $2,345 Mil.
Total Current Assets was $3,178 Mil.
Total Assets was $7,594 Mil.
Property, Plant and Equipment(Net PPE) was $1,700 Mil.
Depreciation, Depletion and Amortization(DDA) was $438 Mil.
Selling, General & Admin. Expense(SGA) was $1,216 Mil.
Total Current Liabilities was $2,198 Mil.
Long-Term Debt was $3,627 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)|
|=||(1981.6 / 11675.7)||/||(2018.9 / 10615.6)|
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)|
|=||(667.6 / 10615.6)||/||(579.7 / 11675.7)|
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 - (3043.7 + 1455.5) / 7205.3)||/||(1 - (3178.3 + 1699.6) / 7594.4)|
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))|
|=||(437.7 / (437.7 + 1699.6))||/||(471.9 / (471.9 + 1455.5))|
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)|
|=||(1441.4 / 11675.7)||/||(1215.8 / 10615.6)|
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)|
|=||((3431 + 2030.9) / 7205.3)||/||((3627.2 + 2198.3) / 7594.4)|
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|
|=||(168.7 - -33.3||-||658.8)||/||7205.3|
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.
RR Donnelley & Sons Co has a M-score of -2.79 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
RR Donnelley & Sons Co Annual Data
RR Donnelley & Sons Co Quarterly Data