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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 -2.61. And the median was -2.16.
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 * 1.6442||+||0.528 * 0.6273||+||0.404 * 1.1844||+||0.892 * 0.6507||+||0.115 * 1.0571|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.6689||+||4.679 * -0.0264||-||0.327 * 1.1782|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $240.6 Mil.|
Revenue was 245.629 + 241.086 + 223.303 + 134.693 = $844.7 Mil.
Gross Profit was 19.028 + 26.761 + 26.514 + 17.505 = $89.8 Mil.
Total Current Assets was $319.6 Mil.
Total Assets was $1,257.8 Mil.
Property, Plant and Equipment(Net PPE) was $441.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $42.0 Mil.
Selling, General & Admin. Expense(SGA) was $21.1 Mil.
Total Current Liabilities was $283.0 Mil.
Long-Term Debt was $744.6 Mil.
Net Income was 1.584 + 16.421 + 17.068 + 14.6 = $49.7 Mil.
Non Operating Income was 0.024 + 0.009 + 0.005 + 0 = $0.0 Mil.
Cash Flow from Operations was 30.549 + 32.431 + 26.941 + -7.07 = $82.9 Mil.
|Accounts Receivable was $224.9 Mil.
Revenue was 336.571 + 376.856 + 292.156 + 292.514 = $1,298.1 Mil.
Gross Profit was 23.76 + 21.08 + 18.973 + 22.762 = $86.6 Mil.
Total Current Assets was $274.8 Mil.
Total Assets was $1,006.3 Mil.
Property, Plant and Equipment(Net PPE) was $396.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $40.0 Mil.
Selling, General & Admin. Expense(SGA) was $19.4 Mil.
Total Current Liabilities was $265.7 Mil.
Long-Term Debt was $432.1 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)|
|=||(240.606 / 844.711)||/||(224.881 / 1298.097)|
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)|
|=||(26.761 / 1298.097)||/||(19.028 / 844.711)|
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 - (319.614 + 441.596) / 1257.831)||/||(1 - (274.769 + 396.066) / 1006.263)|
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))|
|=||(40.035 / (40.035 + 396.066))||/||(41.998 / (41.998 + 441.596))|
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)|
|=||(21.085 / 844.711)||/||(19.415 / 1298.097)|
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)|
|=||((744.597 + 283.029) / 1257.831)||/||((432.092 + 265.682) / 1006.263)|
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|
|=||(49.673 - 0.038||-||82.851)||/||1257.831|
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 -2.61 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