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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 -3.05. And the median was -2.29.
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 * 0.5061||+||0.528 * 1.0532||+||0.404 * 0.9675||+||0.892 * 1.1796||+||0.115 * 0.6598|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9117||+||4.679 * 0.0303||-||0.327 * 1.8495|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $289 Mil.|
Revenue was -604.1 + 1102.4 + 1089.5 + 1011.2 = $2,599 Mil.
Gross Profit was -133.5 + 366.4 + 406.6 + 376.7 = $1,016 Mil.
Total Current Assets was $1,655 Mil.
Total Assets was $3,200 Mil.
Property, Plant and Equipment(Net PPE) was $398 Mil.
Depreciation, Depletion and Amortization(DDA) was $142 Mil.
Selling, General & Admin. Expense(SGA) was $348 Mil.
Total Current Liabilities was $781 Mil.
Long-Term Debt was $2,169 Mil.
Net Income was -215.5 + 102.2 + 108.6 + 109 = $104 Mil.
Non Operating Income was -243.6 + 0 + 0 + 0 = $-244 Mil.
Cash Flow from Operations was 47.4 + 135.8 + 11.4 + 56.3 = $251 Mil.
|Accounts Receivable was $484 Mil.
Revenue was -377.3 + 888.1 + 850.3 + 842.2 = $2,203 Mil.
Gross Profit was -80.9 + 342.3 + 326.8 + 319.1 = $907 Mil.
Total Current Assets was $3,160 Mil.
Total Assets was $5,696 Mil.
Property, Plant and Equipment(Net PPE) was $426 Mil.
Depreciation, Depletion and Amortization(DDA) was $90 Mil.
Selling, General & Admin. Expense(SGA) was $324 Mil.
Total Current Liabilities was $879 Mil.
Long-Term Debt was $1,959 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)|
|=||(289 / 2599)||/||(484.1 / 2203.3)|
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)|
|=||(366.4 / 2203.3)||/||(-133.5 / 2599)|
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 - (1655 + 397.7) / 3199.9)||/||(1 - (3159.7 + 425.7) / 5696.2)|
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))|
|=||(89.6 / (89.6 + 425.7))||/||(142.3 / (142.3 + 397.7))|
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)|
|=||(347.9 / 2599)||/||(323.5 / 2203.3)|
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)|
|=||((2168.5 + 780.7) / 3199.9)||/||((1959.4 + 879.1) / 5696.2)|
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|
|=||(104.3 - -243.6||-||250.9)||/||3199.9|
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 -2.92 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