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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 AK Steel Holding Corp was -0.90. The lowest was -4.27. And the median was -2.48.
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 AK Steel Holding 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 * 0.9357||+||0.528 * 0.8165||+||0.404 * 0.6136||+||0.892 * 1.2308||+||0.115 * 1.0678|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0163||+||4.679 * 0.0385||-||0.327 * 1.1362|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $575 Mil.|
Revenue was 1750.9 + 1997.6 + 1593.8 + 1530.8 = $6,873 Mil.
Gross Profit was 142.3 + 181.3 + 154.9 + 113.9 = $592 Mil.
Total Current Assets was $2,035 Mil.
Total Assets was $4,556 Mil.
Property, Plant and Equipment(Net PPE) was $2,178 Mil.
Depreciation, Depletion and Amortization(DDA) was $230 Mil.
Selling, General & Admin. Expense(SGA) was $150 Mil.
Total Current Liabilities was $1,086 Mil.
Long-Term Debt was $2,529 Mil.
Net Income was -306.3 + 13.5 + -7.2 + -17.1 = $-317 Mil.
Non Operating Income was -273 + -0.9 + -15.3 + -3 = $-292 Mil.
Cash Flow from Operations was -2.7 + 57.8 + -49.5 + -206.1 = $-201 Mil.
|Accounts Receivable was $499 Mil.
Revenue was 1383.5 + 1464.8 + 1331.3 + 1404.5 = $5,584 Mil.
Gross Profit was 47.9 + 140.9 + 108.9 + 95.3 = $393 Mil.
Total Current Assets was $1,326 Mil.
Total Assets was $3,615 Mil.
Property, Plant and Equipment(Net PPE) was $1,844 Mil.
Depreciation, Depletion and Amortization(DDA) was $210 Mil.
Selling, General & Admin. Expense(SGA) was $120 Mil.
Total Current Liabilities was $867 Mil.
Long-Term Debt was $1,657 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)|
|=||(574.6 / 6873.1)||/||(498.9 / 5584.1)|
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)|
|=||(181.3 / 5584.1)||/||(142.3 / 6873.1)|
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 - (2034.8 + 2177.6) / 4556.3)||/||(1 - (1326.3 + 1844.4) / 3615.4)|
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))|
|=||(209.7 / (209.7 + 1844.4))||/||(230.2 / (230.2 + 2177.6))|
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)|
|=||(149.6 / 6873.1)||/||(119.6 / 5584.1)|
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)|
|=||((2528.8 + 1085.8) / 4556.3)||/||((1657.2 + 867.1) / 3615.4)|
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|
|=||(-317.1 - -292.2||-||-200.5)||/||4556.3|
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.
AK Steel Holding Corp has a M-score of -2.45 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
AK Steel Holding Corp Annual Data
AK Steel Holding Corp Quarterly Data