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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 -1.18. The lowest was -3.78. And the median was -2.87.
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 * 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|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was USD 2,059 Mil.|
Revenue was 2828 + 2748.1 + 2746.1 + 3069.3 = USD 11,392 Mil.
Gross Profit was 619.9 + 615.8 + 579.7 + 667.6 = USD 2,483 Mil.
Total Current Assets was USD 3,185 Mil.
Total Assets was USD 7,471 Mil.
Property, Plant and Equipment(Net PPE) was USD 1,504 Mil.
Depreciation, Depletion and Amortization(DDA) was USD 459 Mil.
Selling, General & Admin. Expense(SGA) was USD 1,409 Mil.
Total Current Liabilities was USD 2,450 Mil.
Long-Term Debt was USD 3,216 Mil.
Net Income was 14.3 + 43.5 + 22.3 + 19.5 = USD 100 Mil.
Non Operating Income was -3 + -11.9 + -28.3 + -0.7 = USD -44 Mil.
Cash Flow from Operations was 143.2 + 205.3 + -144.3 + 468.8 = USD 673 Mil.
|Accounts Receivable was USD 2,170 Mil.
Revenue was 2957.8 + 2902.5 + 2673.8 + 2755.3 = USD 11,289 Mil.
Gross Profit was 647.6 + 662.2 + 573.2 + 603.6 = USD 2,487 Mil.
Total Current Assets was USD 3,323 Mil.
Total Assets was USD 7,567 Mil.
Property, Plant and Equipment(Net PPE) was USD 1,580 Mil.
Depreciation, Depletion and Amortization(DDA) was USD 462 Mil.
Selling, General & Admin. Expense(SGA) was USD 1,304 Mil.
Total Current Liabilities was USD 2,416 Mil.
Long-Term Debt was USD 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.
RR 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
RR Donnelley & Sons Co Annual Data
RR Donnelley & Sons Co Quarterly Data