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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 -1.18. The lowest was -3.33. 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 * 0.3289||+||0.528 * 1.0939||+||0.404 * 0.7964||+||0.892 * 1.7099||+||0.115 * 0.7984|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8678||+||4.679 * -0.0474||-||0.327 * 1.644|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|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.
Net Income was 45.8 + 78.9 + 77.6 + -215.5 = $-13 Mil.
Non Operating Income was -48 + 0 + 0 + -50.6 = $-99 Mil.
Cash Flow from Operations was 80.5 + 72.5 + 37.4 + 47.4 = $238 Mil.
|Accounts Receivable was $677 Mil.
Revenue was 653.7 + 662.8 + 644.7 + -377.3 = $1,584 Mil.
Gross Profit was 230.1 + 275.6 + 261.7 + -80.9 = $687 Mil.
Total Current Assets was $3,297 Mil.
Total Assets was $6,958 Mil.
Property, Plant and Equipment(Net PPE) was $682 Mil.
Depreciation, Depletion and Amortization(DDA) was $130 Mil.
Selling, General & Admin. Expense(SGA) was $242 Mil.
Total Current Liabilities was $1,149 Mil.
Long-Term Debt was $2,627 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)|
|=||(380.7 / 2708.3)||/||(676.9 / 1583.9)|
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)|
|=||(280.5 / 1583.9)||/||(255.4 / 2708.3)|
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 - (1719.3 + 399.5) / 3215.5)||/||(1 - (3296.5 + 681.6) / 6958.1)|
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))|
|=||(129.8 / (129.8 + 681.6))||/||(100.1 / (100.1 + 399.5))|
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)|
|=||(359.4 / 2708.3)||/||(242.2 / 1583.9)|
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)|
|=||((2033 + 835.7) / 3215.5)||/||((2626.7 + 1149.3) / 6958.1)|
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|
|=||(-13.2 - -98.6||-||237.8)||/||3215.5|
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.
B/E Aerospace Inc has a M-score of -2.93 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