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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 6 years, the highest Beneish M-Score of Rose Rock Midstream LP was 21.84. The lowest was -2.55. And the median was -1.60.
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 * 0.5308||+||0.528 * 1.209||+||0.404 * 1.4267||+||0.892 * 1.2778||+||0.115 * 1.1623|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.051||+||4.679 * -0.0218||-||0.327 * 1.2368|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $189 Mil.|
Revenue was 134.693 + 334.344 + 374.945 + 290.432 = $1,134 Mil.
Gross Profit was 17.505 + 21.635 + 19.667 + 17.681 = $76 Mil.
Total Current Assets was $275 Mil.
Total Assets was $1,171 Mil.
Property, Plant and Equipment(Net PPE) was $405 Mil.
Depreciation, Depletion and Amortization(DDA) was $35 Mil.
Selling, General & Admin. Expense(SGA) was $21 Mil.
Total Current Liabilities was $228 Mil.
Long-Term Debt was $661 Mil.
Net Income was 14.6 + 14.795 + 16.493 + 11.048 = $57 Mil.
Non Operating Income was 0 + -0.002 + 0 + 0.021 = $0 Mil.
Cash Flow from Operations was -7.07 + 63.332 + 20.301 + 5.87 = $82 Mil.
|Accounts Receivable was $278 Mil.
Revenue was 292.514 + 252.041 + 181.831 + 161.422 = $888 Mil.
Gross Profit was 22.762 + 19.467 + 15.033 + 15.109 = $72 Mil.
Total Current Assets was $350 Mil.
Total Assets was $931 Mil.
Property, Plant and Equipment(Net PPE) was $308 Mil.
Depreciation, Depletion and Amortization(DDA) was $31 Mil.
Selling, General & Admin. Expense(SGA) was $15 Mil.
Total Current Liabilities was $327 Mil.
Long-Term Debt was $245 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)|
|=||(188.847 / 1134.414)||/||(278.429 / 887.808)|
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)|
|=||(21.635 / 887.808)||/||(17.505 / 1134.414)|
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 - (275.265 + 405.283) / 1171.166)||/||(1 - (349.64 + 308.27) / 931.389)|
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))|
|=||(31.14 / (31.14 + 308.27))||/||(34.733 / (34.733 + 405.283))|
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)|
|=||(20.78 / 1134.414)||/||(15.473 / 887.808)|
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)|
|=||((661.072 + 227.607) / 1171.166)||/||((244.578 + 326.835) / 931.389)|
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|
|=||(56.936 - 0.019||-||82.433)||/||1171.166|
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 -2.55 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