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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 R.R.Donnelley & Sons Co was -1.18. The lowest was -3.78. And the median was -2.85.
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 R.R.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 * 1.0294||+||0.528 * 0.9942||+||0.404 * 1.0306||+||0.892 * 0.9672||+||0.115 * 0.9387|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0392||+||4.679 * -0.053||-||0.327 * 1.0195|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $1,968 Mil.|
Revenue was 2729.7 + 2651.4 + 2934.6 + 2828 = $11,144 Mil.
Gross Profit was 604.9 + 569.3 + 648.6 + 619.9 = $2,443 Mil.
Total Current Assets was $2,974 Mil.
Total Assets was $7,088 Mil.
Property, Plant and Equipment(Net PPE) was $1,375 Mil.
Depreciation, Depletion and Amortization(DDA) was $439 Mil.
Selling, General & Admin. Expense(SGA) was $1,423 Mil.
Total Current Liabilities was $2,443 Mil.
Long-Term Debt was $2,944 Mil.
Net Income was -14.5 + 39.8 + 71 + 14.3 = $111 Mil.
Non Operating Income was -1 + 0 + -0.4 + -3 = $-4 Mil.
Cash Flow from Operations was 92.5 + -192.8 + 447.8 + 143.2 = $491 Mil.
|Accounts Receivable was $1,977 Mil.
Revenue was 2748.1 + 2746.1 + 3069.3 + 2957.8 = $11,521 Mil.
Gross Profit was 615.8 + 579.7 + 667.6 + 647.6 = $2,511 Mil.
Total Current Assets was $3,108 Mil.
Total Assets was $7,492 Mil.
Property, Plant and Equipment(Net PPE) was $1,575 Mil.
Depreciation, Depletion and Amortization(DDA) was $463 Mil.
Selling, General & Admin. Expense(SGA) was $1,415 Mil.
Total Current Liabilities was $2,151 Mil.
Long-Term Debt was $3,434 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)|
|=||(1968.4 / 11143.7)||/||(1976.9 / 11521.3)|
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)|
|=||(2510.7 / 11521.3)||/||(2442.7 / 11143.7)|
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 - (2974.3 + 1375) / 7088.2)||/||(1 - (3108.1 + 1575.2) / 7492.4)|
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))|
|=||(462.8 / (462.8 + 1575.2))||/||(438.8 / (438.8 + 1375))|
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)|
|=||(1422.5 / 11143.7)||/||(1415.2 / 11521.3)|
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)|
|=||((2943.8 + 2443.3) / 7088.2)||/||((3434.1 + 2151.2) / 7492.4)|
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|
|=||(110.6 - -4.4||-||490.7)||/||7088.2|
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.
R.R.Donnelley & Sons Co has a M-score of -2.74 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
R.R.Donnelley & Sons Co Annual Data
R.R.Donnelley & Sons Co Quarterly Data