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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 21.83. The lowest was -2.96. And the median was -2.03.
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 * 1.5866||+||0.528 * 0.7317||+||0.404 * 0.9433||+||0.892 * 0.8025||+||0.115 * 1.1713|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.132||+||4.679 * -0.0278||-||0.327 * 1.0635|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $319.9 Mil.|
Revenue was 169.144 + 203.951 + 245.629 + 241.086 = $859.8 Mil.
Gross Profit was 20.655 + 31.153 + 19.028 + 26.761 = $97.6 Mil.
Total Current Assets was $421.5 Mil.
Total Assets was $1,337.4 Mil.
Property, Plant and Equipment(Net PPE) was $443.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $37.4 Mil.
Selling, General & Admin. Expense(SGA) was $19.5 Mil.
Total Current Liabilities was $356.2 Mil.
Long-Term Debt was $774.5 Mil.
Net Income was 9.922 + 26.468 + 1.584 + 16.421 = $54.4 Mil.
Non Operating Income was 0 + 0 + 0.024 + 0.009 = $0.0 Mil.
Cash Flow from Operations was 14.08 + 14.53 + 30.549 + 32.431 = $91.6 Mil.
|Accounts Receivable was $251.2 Mil.
Revenue was 223.303 + 134.693 + 336.571 + 376.856 = $1,071.4 Mil.
Gross Profit was 26.492 + 17.657 + 23.76 + 21.08 = $89.0 Mil.
Total Current Assets was $408.5 Mil.
Total Assets was $1,323.8 Mil.
Property, Plant and Equipment(Net PPE) was $419.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $42.0 Mil.
Selling, General & Admin. Expense(SGA) was $21.4 Mil.
Total Current Liabilities was $308.1 Mil.
Long-Term Debt was $744.3 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)|
|=||(319.893 / 859.81)||/||(251.24 / 1071.423)|
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)|
|=||(88.989 / 1071.423)||/||(97.597 / 859.81)|
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 - (421.534 + 443.327) / 1337.428)||/||(1 - (408.52 + 419.458) / 1323.838)|
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))|
|=||(42.028 / (42.028 + 419.458))||/||(37.375 / (37.375 + 443.327))|
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)|
|=||(19.464 / 859.81)||/||(21.426 / 1071.423)|
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)|
|=||((774.488 + 356.248) / 1337.428)||/||((744.339 + 308.116) / 1323.838)|
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|
|=||(54.395 - 0.033||-||91.59)||/||1337.428|
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 -2.43 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