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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 -2.56. And the median was -1.74.
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 * 1.0939||+||0.528 * 0.9363||+||0.404 * 1.4865||+||0.892 * 1.0479||+||0.115 * 1.1247|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0942||+||4.679 * -0.0298||-||0.327 * 0.9789|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $251 Mil.|
Revenue was 223.303 + 134.693 + 334.344 + 374.945 = $1,067 Mil.
Gross Profit was 26.514 + 17.505 + 21.635 + 19.667 = $85 Mil.
Total Current Assets was $409 Mil.
Total Assets was $1,324 Mil.
Property, Plant and Equipment(Net PPE) was $419 Mil.
Depreciation, Depletion and Amortization(DDA) was $38 Mil.
Selling, General & Admin. Expense(SGA) was $21 Mil.
Total Current Liabilities was $308 Mil.
Long-Term Debt was $744 Mil.
Net Income was 17.068 + 14.6 + 14.795 + 16.493 = $63 Mil.
Non Operating Income was 0.005 + 0 + -0.002 + 0 = $0 Mil.
Cash Flow from Operations was 26.941 + -7.07 + 63.332 + 19.24 = $102 Mil.
|Accounts Receivable was $219 Mil.
Revenue was 292.156 + 292.514 + 252.041 + 181.831 = $1,019 Mil.
Gross Profit was 18.973 + 22.762 + 19.467 + 15.033 = $76 Mil.
Total Current Assets was $672 Mil.
Total Assets was $1,349 Mil.
Property, Plant and Equipment(Net PPE) was $336 Mil.
Depreciation, Depletion and Amortization(DDA) was $35 Mil.
Selling, General & Admin. Expense(SGA) was $18 Mil.
Total Current Liabilities was $248 Mil.
Long-Term Debt was $848 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)|
|=||(251.24 / 1067.285)||/||(219.175 / 1018.542)|
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)|
|=||(17.505 / 1018.542)||/||(26.514 / 1067.285)|
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 - (408.52 + 419.458) / 1323.838)||/||(1 - (672.365 + 336.377) / 1348.537)|
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))|
|=||(34.726 / (34.726 + 336.377))||/||(38.065 / (38.065 + 419.458))|
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)|
|=||(21.108 / 1067.285)||/||(18.41 / 1018.542)|
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)|
|=||((744.339 + 308.116) / 1323.838)||/||((847.568 + 247.677) / 1348.537)|
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|
|=||(62.956 - 0.003||-||102.443)||/||1323.838|
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 -2.32 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