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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 -2.61 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 -2.92.
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 * 1.0839||+||0.528 * 1.0232||+||0.404 * 0.9452||+||0.892 * 1.065||+||0.115 * 1.1055|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0575||+||4.679 * -0.0535||-||0.327 * 1.0216|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $2,083 Mil.|
Revenue was 2902.5 + 2673.8 + 2755.3 + 2614.9 = $10,947 Mil.
Gross Profit was 662.2 + 573.2 + 603.6 + 570.4 = $2,409 Mil.
Total Current Assets was $3,203 Mil.
Total Assets was $7,547 Mil.
Property, Plant and Equipment(Net PPE) was $1,650 Mil.
Depreciation, Depletion and Amortization(DDA) was $449 Mil.
Selling, General & Admin. Expense(SGA) was $1,261 Mil.
Total Current Liabilities was $2,348 Mil.
Long-Term Debt was $3,429 Mil.
Net Income was 64.7 + -29 + 104 + 14.7 = $154 Mil.
Non Operating Income was -2.3 + -81.7 + -18.2 + -46 = $-148 Mil.
Cash Flow from Operations was 150.1 + -80.4 + 387.7 + 249.2 = $707 Mil.
|Accounts Receivable was $1,805 Mil.
Revenue was 2571.6 + 2538.5 + 2659.6 + 2508.8 = $10,279 Mil.
Gross Profit was 598.2 + 558.3 + 585.3 + 573 = $2,315 Mil.
Total Current Assets was $2,807 Mil.
Total Assets was $6,902 Mil.
Property, Plant and Equipment(Net PPE) was $1,488 Mil.
Depreciation, Depletion and Amortization(DDA) was $460 Mil.
Selling, General & Admin. Expense(SGA) was $1,120 Mil.
Total Current Liabilities was $1,934 Mil.
Long-Term Debt was $3,238 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)|
|=||(2083.3 / 10946.5)||/||(1804.7 / 10278.5)|
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)|
|=||(573.2 / 10278.5)||/||(662.2 / 10946.5)|
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 - (3202.9 + 1650) / 7546.9)||/||(1 - (2807.4 + 1487.6) / 6901.6)|
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))|
|=||(460.3 / (460.3 + 1487.6))||/||(448.6 / (448.6 + 1650))|
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)|
|=||(1260.9 / 10946.5)||/||(1119.6 / 10278.5)|
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)|
|=||((3428.9 + 2348.4) / 7546.9)||/||((3237.7 + 1934.1) / 6901.6)|
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|
|=||(154.4 - -148.2||-||706.6)||/||7546.9|
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 -2.61 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