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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 Baker Hughes Inc was -1.27. The lowest was -3.01. And the median was -2.55.
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 Baker Hughes 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 * 0.9518||+||0.528 * 0.9386||+||0.404 * 0.9991||+||0.892 * 1.0892||+||0.115 * 0.9617|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9367||+||4.679 * -0.0507||-||0.327 * 1.0168|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $5,539 Mil.|
Revenue was 6250 + 5935 + 5731 + 5860 = $23,776 Mil.
Gross Profit was 1143 + 1190 + 1011 + 974 = $4,318 Mil.
Total Current Assets was $11,811 Mil.
Total Assets was $28,642 Mil.
Property, Plant and Equipment(Net PPE) was $9,081 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,782 Mil.
Selling, General & Admin. Expense(SGA) was $1,313 Mil.
Total Current Liabilities was $4,962 Mil.
Long-Term Debt was $3,894 Mil.
Net Income was 375 + 353 + 328 + 248 = $1,304 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1058 + 393 + 303 + 1003 = $2,757 Mil.
|Accounts Receivable was $5,343 Mil.
Revenue was 5787 + 5487 + 5230 + 5325 = $21,829 Mil.
Gross Profit was 1037 + 896 + 904 + 884 = $3,721 Mil.
Total Current Assets was $11,507 Mil.
Total Assets was $28,074 Mil.
Property, Plant and Equipment(Net PPE) was $8,964 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,679 Mil.
Selling, General & Admin. Expense(SGA) was $1,287 Mil.
Total Current Liabilities was $4,699 Mil.
Long-Term Debt was $3,838 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)|
|=||(5539 / 23776)||/||(5343 / 21829)|
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)|
|=||(1190 / 21829)||/||(1143 / 23776)|
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 - (11811 + 9081) / 28642)||/||(1 - (11507 + 8964) / 28074)|
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))|
|=||(1679 / (1679 + 8964))||/||(1782 / (1782 + 9081))|
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)|
|=||(1313 / 23776)||/||(1287 / 21829)|
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)|
|=||((3894 + 4962) / 28642)||/||((3838 + 4699) / 28074)|
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|
|=||(1304 - 0||-||2757)||/||28642|
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.
Baker Hughes Inc has a M-score of -2.71 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
Baker Hughes Inc Annual Data
Baker Hughes Inc Quarterly Data