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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 13 years, the highest Beneish M-Score of Staples Inc was -0.94. The lowest was -3.27. And the median was -2.58.
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 Staples Inc 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 * 1.0594||+||0.528 * 0.9856||+||0.404 * 0.9003||+||0.892 * 0.9544||+||0.115 * 0.9055|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0365||+||4.679 * -0.0954||-||0.327 * 1.067|
|This Year (Jul15) TTM:||Last Year (Jul14) TTM:|
|Accounts Receivable was $1,862 Mil.|
Revenue was 4937 + 5262 + 5656.467 + 5961.531 = $21,817 Mil.
Gross Profit was 1264 + 1347 + 1486.423 + 1596.276 = $5,694 Mil.
Total Current Assets was $5,374 Mil.
Total Assets was $10,326 Mil.
Property, Plant and Equipment(Net PPE) was $1,597 Mil.
Depreciation, Depletion and Amortization(DDA) was $469 Mil.
Selling, General & Admin. Expense(SGA) was $4,716 Mil.
Total Current Liabilities was $3,412 Mil.
Long-Term Debt was $1,018 Mil.
Net Income was 36 + 59 + -260.351 + 216.792 = $51 Mil.
Non Operating Income was -2 + 1 + 1.565 + -2.538 = $-2 Mil.
Cash Flow from Operations was 0 + 300 + 134.76 + 604.178 = $1,039 Mil.
|Accounts Receivable was $1,842 Mil.
Revenue was 5220 + 5654 + 5873.273 + 6111.695 = $22,859 Mil.
Gross Profit was 1308 + 1410 + 1507.053 + 1654.726 = $5,880 Mil.
Total Current Assets was $5,432 Mil.
Total Assets was $11,278 Mil.
Property, Plant and Equipment(Net PPE) was $1,776 Mil.
Depreciation, Depletion and Amortization(DDA) was $459 Mil.
Selling, General & Admin. Expense(SGA) was $4,767 Mil.
Total Current Liabilities was $3,519 Mil.
Long-Term Debt was $1,016 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)|
|=||(1862 / 21816.998)||/||(1841.614 / 22858.968)|
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)|
|=||(1347 / 22858.968)||/||(1264 / 21816.998)|
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 - (5374 + 1597) / 10326)||/||(1 - (5431.874 + 1776.144) / 11278.024)|
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))|
|=||(459.441 / (459.441 + 1776.144))||/||(468.872 / (468.872 + 1597))|
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)|
|=||(4716.044 / 21816.998)||/||(4767.339 / 22858.968)|
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)|
|=||((1018 + 3412) / 10326)||/||((1015.699 + 3519.048) / 11278.024)|
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|
|=||(51.441 - -1.973||-||1038.938)||/||10326|
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.
Staples Inc has a M-score of -3.00 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
Staples Inc Annual Data
Staples Inc Quarterly Data