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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 -2.49.
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 * 0.773||+||0.528 * 0.8609||+||0.404 * 0.5063||+||0.892 * 1.2314||+||0.115 * 1.0396|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1822||+||4.679 * -0.0389||-||0.327 * 1.0836|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $568 Mil.|
Revenue was 1689.4 + 1750.9 + 1997.6 + 1593.8 = $7,032 Mil.
Gross Profit was 110.2 + 142.3 + 181.3 + 154.9 = $589 Mil.
Total Current Assets was $1,914 Mil.
Total Assets was $4,335 Mil.
Property, Plant and Equipment(Net PPE) was $2,136 Mil.
Depreciation, Depletion and Amortization(DDA) was $238 Mil.
Selling, General & Admin. Expense(SGA) was $143 Mil.
Total Current Liabilities was $1,051 Mil.
Long-Term Debt was $2,443 Mil.
Net Income was -64 + -306.3 + 13.5 + -7.2 = $-364 Mil.
Non Operating Income was 1.5 + -273 + -0.9 + -15.3 = $-288 Mil.
Cash Flow from Operations was 86.6 + -2.7 + 57.8 + -49.5 = $92 Mil.
|Accounts Receivable was $596 Mil.
Revenue was 1530.8 + 1383.5 + 1464.8 + 1331.3 = $5,710 Mil.
Gross Profit was 113.9 + 47.9 + 140.9 + 108.9 = $412 Mil.
Total Current Assets was $1,506 Mil.
Total Assets was $3,807 Mil.
Property, Plant and Equipment(Net PPE) was $1,805 Mil.
Depreciation, Depletion and Amortization(DDA) was $210 Mil.
Selling, General & Admin. Expense(SGA) was $98 Mil.
Total Current Liabilities was $883 Mil.
Long-Term Debt was $1,948 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)|
|=||(567.5 / 7031.7)||/||(596.2 / 5710.4)|
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)|
|=||(142.3 / 5710.4)||/||(110.2 / 7031.7)|
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 - (1914.3 + 2135.5) / 4335.4)||/||(1 - (1506 + 1805.3) / 3806.6)|
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))|
|=||(210 / (210 + 1805.3))||/||(237.9 / (237.9 + 2135.5))|
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)|
|=||(143.1 / 7031.7)||/||(98.3 / 5710.4)|
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)|
|=||((2442.5 + 1050.9) / 4335.4)||/||((1948.2 + 882.5) / 3806.6)|
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|
|=||(-364 - -287.7||-||92.2)||/||4335.4|
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 -2.99 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