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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 -1.45. The lowest was -4.21. And the median was -2.52.
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 * 0.926||+||0.528 * 2.4846||+||0.404 * 1.2592||+||0.892 * 0.6412||+||0.115 * 0.8075|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.4393||+||4.679 * -0.1563||-||0.327 * 0.9332|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $3,217 Mil.|
Revenue was 3394 + 3786 + 3968 + 4594 = $15,742 Mil.
Gross Profit was 252 + 383 + 353 + 252 = $1,240 Mil.
Total Current Assets was $9,268 Mil.
Total Assets was $24,080 Mil.
Property, Plant and Equipment(Net PPE) was $6,693 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,742 Mil.
Selling, General & Admin. Expense(SGA) was $1,173 Mil.
Total Current Liabilities was $2,775 Mil.
Long-Term Debt was $3,890 Mil.
Net Income was -1031 + -159 + -188 + -589 = $-1,967 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 531 + 428 + 581 + 256 = $1,796 Mil.
|Accounts Receivable was $5,418 Mil.
Revenue was 6635 + 6250 + 5935 + 5731 = $24,551 Mil.
Gross Profit was 1461 + 1143 + 1190 + 1011 = $4,805 Mil.
Total Current Assets was $12,045 Mil.
Total Assets was $28,827 Mil.
Property, Plant and Equipment(Net PPE) was $9,063 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,814 Mil.
Selling, General & Admin. Expense(SGA) was $1,271 Mil.
Total Current Liabilities was $4,637 Mil.
Long-Term Debt was $3,913 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)|
|=||(3217 / 15742)||/||(5418 / 24551)|
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)|
|=||(383 / 24551)||/||(252 / 15742)|
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 - (9268 + 6693) / 24080)||/||(1 - (12045 + 9063) / 28827)|
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))|
|=||(1814 / (1814 + 9063))||/||(1742 / (1742 + 6693))|
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)|
|=||(1173 / 15742)||/||(1271 / 24551)|
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)|
|=||((3890 + 2775) / 24080)||/||((3913 + 4637) / 28827)|
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|
|=||(-1967 - 0||-||1796)||/||24080|
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 -2.79 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