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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 -2.59 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 -2.91.
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 * 1.0416||+||0.528 * 1.0109||+||0.404 * 0.9643||+||0.892 * 1.0871||+||0.115 * 1.0422|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0361||+||4.679 * -0.0443||-||0.327 * 1.0161|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $2,170 Mil.|
Revenue was 2957.8 + 2902.5 + 2673.8 + 2755.3 = $11,289 Mil.
Gross Profit was 647.6 + 662.2 + 573.2 + 603.6 = $2,487 Mil.
Total Current Assets was $3,323 Mil.
Total Assets was $7,567 Mil.
Property, Plant and Equipment(Net PPE) was $1,580 Mil.
Depreciation, Depletion and Amortization(DDA) was $462 Mil.
Selling, General & Admin. Expense(SGA) was $1,304 Mil.
Total Current Liabilities was $2,416 Mil.
Long-Term Debt was $3,427 Mil.
Net Income was 62.2 + 64.7 + -29 + 104 = $202 Mil.
Non Operating Income was -2 + -2.3 + -81.7 + -18.2 = $-104 Mil.
Cash Flow from Operations was 184.2 + 150.1 + -80.4 + 387.7 = $642 Mil.
|Accounts Receivable was $1,916 Mil.
Revenue was 2614.9 + 2571.6 + 2538.5 + 2659.6 = $10,385 Mil.
Gross Profit was 570.4 + 598.2 + 558.3 + 585.3 = $2,312 Mil.
Total Current Assets was $3,059 Mil.
Total Assets was $7,102 Mil.
Property, Plant and Equipment(Net PPE) was $1,451 Mil.
Depreciation, Depletion and Amortization(DDA) was $448 Mil.
Selling, General & Admin. Expense(SGA) was $1,158 Mil.
Total Current Liabilities was $2,157 Mil.
Long-Term Debt was $3,240 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)|
|=||(2169.6 / 11289.4)||/||(1916.1 / 10384.6)|
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)|
|=||(662.2 / 10384.6)||/||(647.6 / 11289.4)|
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 - (3323.4 + 1579.9) / 7566.9)||/||(1 - (3058.6 + 1450.9) / 7102)|
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))|
|=||(447.6 / (447.6 + 1450.9))||/||(461.9 / (461.9 + 1579.9))|
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)|
|=||(1303.9 / 11289.4)||/||(1157.6 / 10384.6)|
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)|
|=||((3427.3 + 2415.7) / 7566.9)||/||((3240.1 + 2157) / 7102)|
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|
|=||(201.9 - -104.2||-||641.6)||/||7566.9|
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 -2.59 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