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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 -2.86.
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 * 0.9405||+||0.528 * 1.0105||+||0.404 * 1.058||+||0.892 * 1.009||+||0.115 * 0.9683|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0711||+||4.679 * -0.0709||-||0.327 * 0.9823|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $2,059 Mil.|
Revenue was 2828 + 2748.1 + 2746.1 + 3069.3 = $11,392 Mil.
Gross Profit was 619.9 + 615.8 + 579.7 + 667.6 = $2,483 Mil.
Total Current Assets was $3,185 Mil.
Total Assets was $7,471 Mil.
Property, Plant and Equipment(Net PPE) was $1,504 Mil.
Depreciation, Depletion and Amortization(DDA) was $459 Mil.
Selling, General & Admin. Expense(SGA) was $1,409 Mil.
Total Current Liabilities was $2,450 Mil.
Long-Term Debt was $3,216 Mil.
Net Income was 14.3 + 43.5 + 22.3 + 19.5 = $100 Mil.
Non Operating Income was -3 + -11.9 + -28.3 + -0.7 = $-44 Mil.
Cash Flow from Operations was 143.2 + 205.3 + -144.3 + 468.8 = $673 Mil.
|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.
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)|
|=||(2059 / 11391.5)||/||(2169.6 / 11289.4)|
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)|
|=||(615.8 / 11289.4)||/||(619.9 / 11391.5)|
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 - (3184.5 + 1504) / 7470.6)||/||(1 - (3323.4 + 1579.9) / 7566.9)|
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))|
|=||(461.9 / (461.9 + 1579.9))||/||(458.5 / (458.5 + 1504))|
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)|
|=||(1409.2 / 11391.5)||/||(1303.9 / 11289.4)|
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)|
|=||((3216.1 + 2450.3) / 7470.6)||/||((3427.3 + 2415.7) / 7566.9)|
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|
|=||(99.6 - -43.9||-||673)||/||7470.6|
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 -2.84 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