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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 B/E Aerospace Inc was -1.46. The lowest was -3.22. And the median was -2.27.
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 B/E Aerospace 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 * 1.0747||+||0.528 * 1.0093||+||0.404 * 0.9511||+||0.892 * 1.0566||+||0.115 * 1.1339|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8587||+||4.679 * -0.0175||-||0.327 * 0.9822|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $432 Mil.|
Revenue was 732.7 + 753.1 + 716.7 + 659.2 = $2,862 Mil.
Gross Profit was 275.2 + 305.3 + 280.1 + 262.8 = $1,123 Mil.
Total Current Assets was $1,871 Mil.
Total Assets was $3,349 Mil.
Property, Plant and Equipment(Net PPE) was $392 Mil.
Depreciation, Depletion and Amortization(DDA) was $84 Mil.
Selling, General & Admin. Expense(SGA) was $326 Mil.
Total Current Liabilities was $899 Mil.
Long-Term Debt was $2,036 Mil.
Net Income was 83.3 + 84.8 + 82.6 + 83.4 = $334 Mil.
Non Operating Income was -44.8 + 0 + 0 + 143.9 = $99 Mil.
Cash Flow from Operations was 79.1 + 82 + 12.1 + 120.4 = $294 Mil.
|Accounts Receivable was $381 Mil.
Revenue was 679.8 + 700.6 + 690 + 637.9 = $2,708 Mil.
Gross Profit was 255.4 + 280.5 + 288.4 + 248.8 = $1,073 Mil.
Total Current Assets was $1,719 Mil.
Total Assets was $3,216 Mil.
Property, Plant and Equipment(Net PPE) was $400 Mil.
Depreciation, Depletion and Amortization(DDA) was $100 Mil.
Selling, General & Admin. Expense(SGA) was $359 Mil.
Total Current Liabilities was $836 Mil.
Long-Term Debt was $2,033 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)|
|=||(432.3 / 2861.7)||/||(380.7 / 2708.3)|
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)|
|=||(1073.1 / 2708.3)||/||(1123.4 / 2861.7)|
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 - (1870.5 + 392.3) / 3349.2)||/||(1 - (1719.3 + 399.5) / 3215.5)|
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))|
|=||(100.1 / (100.1 + 399.5))||/||(84.2 / (84.2 + 392.3))|
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)|
|=||(326.1 / 2861.7)||/||(359.4 / 2708.3)|
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)|
|=||((2035.8 + 899.1) / 3349.2)||/||((2033 + 835.7) / 3215.5)|
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|
|=||(334.1 - 99.1||-||293.6)||/||3349.2|
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.
B/E Aerospace Inc has a M-score of -2.41 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
B/E Aerospace Inc Annual Data
B/E Aerospace Inc Quarterly Data