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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.
RR Donnelley & Sons Co has a M-score of -2.66 suggests that the company is not a 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 -2.93.
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 * 1.0512||+||0.528 * 1.0221||+||0.404 * 0.9467||+||0.892 * 1.0371||+||0.115 * 1.1394|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0644||+||4.679 * -0.0531||-||0.327 * 1.0212|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|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.
Net Income was -29 + 104 + 14.7 + 65.4 = $155 Mil.
Non Operating Income was -81.7 + -18.2 + -46 + -6 = $-152 Mil.
Cash Flow from Operations was -80.4 + 387.7 + 249.2 + 153.7 = $710 Mil.
|Accounts Receivable was $1,852 Mil.
Revenue was 2538.5 + 2659.6 + 2508.8 + 2528.6 = $10,236 Mil.
Gross Profit was 558.3 + 585.3 + 573 + 594.7 = $2,311 Mil.
Total Current Assets was $2,814 Mil.
Total Assets was $7,007 Mil.
Property, Plant and Equipment(Net PPE) was $1,545 Mil.
Depreciation, Depletion and Amortization(DDA) was $470 Mil.
Selling, General & Admin. Expense(SGA) was $1,101 Mil.
Total Current Liabilities was $1,751 Mil.
Long-Term Debt was $3,512 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)|
|=||(2018.9 / 10615.6)||/||(1851.8 / 10235.5)|
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)|
|=||(603.6 / 10235.5)||/||(573.2 / 10615.6)|
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 - (3178.3 + 1699.6) / 7594.4)||/||(1 - (2814.4 + 1544.9) / 7006.8)|
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))|
|=||(470.2 / (470.2 + 1544.9))||/||(437.7 / (437.7 + 1699.6))|
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)|
|=||(1215.8 / 10615.6)||/||(1101.3 / 10235.5)|
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)|
|=||((3627.2 + 2198.3) / 7594.4)||/||((3512.2 + 1750.9) / 7006.8)|
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|
|=||(155.1 - -151.9||-||710.2)||/||7594.4|
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 -2.66 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