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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 -3.86. And the median was -2.41.
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 * 1.0504||+||0.528 * 1.0849||+||0.404 * 1.0164||+||0.892 * 1.1679||+||0.115 * 1.097|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9815||+||4.679 * 0.0508||-||0.327 * 1.1359|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $644 Mil.|
Revenue was 1997.6 + 1593.8 + 1530.8 + 1383.5 = $6,506 Mil.
Gross Profit was 181.3 + 154.9 + 113.9 + 47.9 = $498 Mil.
Total Current Assets was $2,026 Mil.
Total Assets was $4,859 Mil.
Property, Plant and Equipment(Net PPE) was $2,213 Mil.
Depreciation, Depletion and Amortization(DDA) was $222 Mil.
Selling, General & Admin. Expense(SGA) was $157 Mil.
Total Current Liabilities was $1,125 Mil.
Long-Term Debt was $2,453 Mil.
Net Income was 13.5 + -7.2 + -17.1 + -86.1 = $-97 Mil.
Non Operating Income was -0.9 + -15.3 + -3 + -1.9 = $-21 Mil.
Cash Flow from Operations was 57.8 + -49.5 + -206.1 + -125 = $-323 Mil.
|Accounts Receivable was $525 Mil.
Revenue was 1464.8 + 1331.3 + 1404.5 + 1369.8 = $5,570 Mil.
Gross Profit was 140.9 + 108.9 + 95.3 + 117.5 = $463 Mil.
Total Current Assets was $1,273 Mil.
Total Assets was $3,606 Mil.
Property, Plant and Equipment(Net PPE) was $1,880 Mil.
Depreciation, Depletion and Amortization(DDA) was $209 Mil.
Selling, General & Admin. Expense(SGA) was $137 Mil.
Total Current Liabilities was $831 Mil.
Long-Term Debt was $1,506 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)|
|=||(644.3 / 6505.7)||/||(525.2 / 5570.4)|
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)|
|=||(154.9 / 5570.4)||/||(181.3 / 6505.7)|
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 - (2025.7 + 2213.2) / 4858.5)||/||(1 - (1273.2 + 1880.1) / 3605.7)|
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))|
|=||(209.2 / (209.2 + 1880.1))||/||(222.3 / (222.3 + 2213.2))|
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)|
|=||(156.7 / 6505.7)||/||(136.7 / 5570.4)|
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)|
|=||((2452.5 + 1125.2) / 4858.5)||/||((1506.2 + 831.4) / 3605.7)|
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|
|=||(-96.9 - -21.1||-||-322.8)||/||4858.5|
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 -2.02 signals that the company is likely to 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