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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 7 years, the highest Beneish M-Score of Rose Rock Midstream LP was 21.84. The lowest was -2.98. And the median was -1.99.
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 Rose Rock Midstream LP 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 * 1.4118||+||0.528 * 0.5957||+||0.404 * 0.9427||+||0.892 * 0.8057||+||0.115 * 0.9836|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2164||+||4.679 * -0.0354||-||0.327 * 1.0715|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $214.8 Mil.|
Revenue was 203.951 + 245.629 + 241.086 + 223.303 = $914.0 Mil.
Gross Profit was 31.153 + 19.028 + 26.761 + 26.514 = $103.5 Mil.
Total Current Assets was $290.5 Mil.
Total Assets was $1,212.8 Mil.
Property, Plant and Equipment(Net PPE) was $443.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $39.7 Mil.
Selling, General & Admin. Expense(SGA) was $20.4 Mil.
Total Current Liabilities was $229.2 Mil.
Long-Term Debt was $756.9 Mil.
Net Income was 26.468 + 1.584 + 16.421 + 17.068 = $61.5 Mil.
Non Operating Income was 0 + 0.024 + 0.009 + 0.005 = $0.0 Mil.
Cash Flow from Operations was 14.53 + 30.549 + 32.431 + 26.941 = $104.5 Mil.
|Accounts Receivable was $188.8 Mil.
Revenue was 134.693 + 334.344 + 374.945 + 290.432 = $1,134.4 Mil.
Gross Profit was 17.505 + 21.635 + 19.667 + 17.681 = $76.5 Mil.
Total Current Assets was $275.3 Mil.
Total Assets was $1,171.2 Mil.
Property, Plant and Equipment(Net PPE) was $405.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $35.7 Mil.
Selling, General & Admin. Expense(SGA) was $20.8 Mil.
Total Current Liabilities was $227.6 Mil.
Long-Term Debt was $661.1 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)|
|=||(214.806 / 913.969)||/||(188.847 / 1134.414)|
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)|
|=||(76.488 / 1134.414)||/||(103.456 / 913.969)|
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 - (290.474 + 443.415) / 1212.837)||/||(1 - (275.265 + 405.283) / 1171.166)|
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))|
|=||(35.681 / (35.681 + 405.283))||/||(39.748 / (39.748 + 443.415))|
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)|
|=||(20.365 / 913.969)||/||(20.78 / 1134.414)|
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)|
|=||((756.921 + 229.164) / 1212.837)||/||((661.072 + 227.607) / 1171.166)|
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|
|=||(61.541 - 0.038||-||104.451)||/||1212.837|
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.
Rose Rock Midstream LP 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
Rose Rock Midstream LP Annual Data
Rose Rock Midstream LP Quarterly Data