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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 RR Donnelley & Sons Co was -1.94. The lowest was -3.41. And the median was -2.96.
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 * 1.0025||+||0.528 * 1.0116||+||0.404 * 1.1601||+||0.892 * 1.1072||+||0.115 * 0.9803|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0909||+||4.679 * -0.0679||-||0.327 * 0.9444|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $2,034 Mil.|
Revenue was 3069.3 + 2957.8 + 2902.5 + 2673.8 = $11,603 Mil.
Gross Profit was 667.6 + 647.6 + 662.2 + 573.2 = $2,551 Mil.
Total Current Assets was $3,373 Mil.
Total Assets was $7,639 Mil.
Property, Plant and Equipment(Net PPE) was $1,516 Mil.
Depreciation, Depletion and Amortization(DDA) was $474 Mil.
Selling, General & Admin. Expense(SGA) was $1,427 Mil.
Total Current Liabilities was $2,367 Mil.
Long-Term Debt was $3,429 Mil.
Net Income was 19.5 + 62.2 + 64.7 + -29 = $117 Mil.
Non Operating Income was -0.7 + -2 + -2.3 + -81.7 = $-87 Mil.
Cash Flow from Operations was 468.8 + 184.2 + 150.1 + -80.4 = $723 Mil.
|Accounts Receivable was $1,832 Mil.
Revenue was 2755.3 + 2614.9 + 2571.6 + 2538.5 = $10,480 Mil.
Gross Profit was 603.6 + 570.4 + 598.2 + 558.3 = $2,331 Mil.
Total Current Assets was $3,562 Mil.
Total Assets was $7,238 Mil.
Property, Plant and Equipment(Net PPE) was $1,430 Mil.
Depreciation, Depletion and Amortization(DDA) was $436 Mil.
Selling, General & Admin. Expense(SGA) was $1,182 Mil.
Total Current Liabilities was $2,229 Mil.
Long-Term Debt was $3,587 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)|
|=||(2033.8 / 11603.4)||/||(1832.3 / 10480.3)|
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)|
|=||(647.6 / 10480.3)||/||(667.6 / 11603.4)|
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 - (3373.3 + 1515.5) / 7639.3)||/||(1 - (3561.6 + 1430.1) / 7238.2)|
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))|
|=||(435.8 / (435.8 + 1430.1))||/||(474 / (474 + 1515.5))|
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)|
|=||(1427 / 11603.4)||/||(1181.5 / 10480.3)|
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)|
|=||((3429.1 + 2367.3) / 7639.3)||/||((3587 + 2228.7) / 7238.2)|
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|
|=||(117.4 - -86.7||-||722.7)||/||7639.3|
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 -2.63 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