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Education Management Corp  (OTCPK:EDMC) Beneish M-Score: 0.00 (As of Today)

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.

Education Management Corp has a M-score of -4.29 suggests that the company is not a manipulator.

During the past 13 years, the highest Beneish M-Score of Education Management Corp was 0.00. The lowest was 0.00. And the median was 0.00.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Education Management Corp Annual Data

Jun05 Jun06 Jun07 Jun08 Jun09 Jun10 Jun11 Jun12 Jun13 Jun14
Beneish M-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -2.25 -2.68 -4.96 -3.28 -4.54

Education Management Corp Quarterly Data

Sep09 Dec09 Mar10 Jun10 Sep10 Dec10 Mar11 Jun11 Sep11 Dec11 Mar12 Jun12 Sep12 Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14
Beneish M-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -3.28 -1.32 -1.60 -0.99 -4.54

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Calculation

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski 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 Education Management Corp 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 * 1.1195+0.528 * 1.4396+0.404 * 0.6553+0.892 * 0.9096+0.115 * 0.9105
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7473+4.679 * -0.3913-0.327 * 1.3994
=-4.29

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $210 Mil.
Revenue was 503.481 + 595.202 + 593.673 + 580.38 = $2,273 Mil.
Gross Profit was -870.218 + 595.202 + 248.086 + 222.692 = $196 Mil.
Total Current Assets was $876 Mil.
Total Assets was $1,877 Mil.
Property, Plant and Equipment(Net PPE) was $429 Mil.
Depreciation, Depletion and Amortization(DDA) was $153 Mil.
Selling, General, & Admin. Expense(SGA) was $-36 Mil.
Total Current Liabilities was $635 Mil.
Long-Term Debt & Capital Lease Obligation was $1,272 Mil.
Net Income was -187.845 + -467.646 + 1.089 + -9.514 = $-664 Mil.
Non-Recurring Items was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -101.529 + 132.485 + -87.517 + 127.207 = $71 Mil.
Accounts Receivable was $206 Mil.
Revenue was 595.236 + 638.903 + 654.895 + 609.564 = $2,499 Mil.
Gross Profit was -851.861 + 638.903 + 294.518 + 228.268 = $310 Mil.
Total Current Assets was $772 Mil.
Total Assets was $2,423 Mil.
Property, Plant and Equipment(Net PPE) was $526 Mil.
(DDA) was $165 Mil.
Selling, General, & Admin. Expense(SGA) was $-53 Mil.
Total Current Liabilities was $486 Mil.
Long-Term Debt & Capital Lease Obligation was $1,273 Mil.




1. DSRI = Days Sales in Receivables Index

Measured as the ratio of Revenue in Accounts Receivable in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(210.182 / 2272.736) / (206.406 / 2498.598)
=0.09247972 / 0.08260873
=1.1195

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(309.828 / 2498.598) / (195.762 / 2272.736)
=0.12400074 / 0.08613495
=1.4396

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than Property, Plant and Equipment to Total Assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (875.966 + 429.457) / 1877.036) / (1 - (771.619 + 525.625) / 2423.356)
=0.30452959 / 0.46469111
=0.6553

4. SGI = Sales Growth Index

Ratio of Revenue 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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=2272.736 / 2498.598
=0.9096

5. DEPI = Depreciation Index

Measured as the ratio of the rate of Depreciation, Depletion and Amortization 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))
=(164.712 / (164.712 + 525.625)) / (152.501 / (152.501 + 429.457))
=0.23859651 / 0.26204812
=0.9105

6. SGAI = Sales, General and Administrative expenses Index

The ratio of c 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)
=(-35.709 / 2272.736) / (-52.531 / 2498.598)
=-0.0157119 / -0.02102419
=0.7473

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)
=((1271.586 + 635.325) / 1877.036) / ((1273.164 + 486.098) / 2423.356)
=1.01591605 / 0.72596102
=1.3994

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-663.916 - 0 - 70.646) / 1877.036
=-0.3913

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.

Education Management Corp has a M-score of -4.29 suggests that the company will not be a manipulator.


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