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Babcock & Wilcox Co (NYSE:BWC)
Beneish M-Score
-2.10 (As of Today)

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.

Babcock & Wilcox Co has a M-score of -2.10 signals that the company is a manipulator.

BWC' s 10-Year Beneish M-Score Range
Min: -2.5   Max: -2.1
Current: -2.1

-2.5
-2.1

During the past 6 years, the highest Beneish M-Score of Babcock & Wilcox Co was -2.10. The lowest was -2.50. And the median was -2.37.


Definition

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 Babcock & Wilcox Co 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 * 0.9427+0.528 * 0.8112+0.404 * 0.9072+0.892 * 0.9384+0.115 * 0.9947
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.923+4.679 * 0.1244-0.327 * 0.8969
=-2.10

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $395 Mil.
Revenue was 662.017 + 802.815 + 774.834 + 886.136 = $3,126 Mil.
Gross Profit was 159.71 + 385.301 + 196.44 + 200.093 = $942 Mil.
Total Current Assets was $1,339 Mil.
Total Assets was $2,500 Mil.
Property, Plant and Equipment(Net PPE) was $448 Mil.
Depreciation, Depletion and Amortization(DDA) was $70 Mil.
Selling, General & Admin. Expense(SGA) was $370 Mil.
Total Current Liabilities was $808 Mil.
Long-Term Debt was $15 Mil.
Net Income was 45.044 + 165.588 + 60.446 + 72.87 = $344 Mil.
Non Operating Income was 1.322 + -19.395 + -0.533 + 1.005 = $-18 Mil.
Cash Flow from Operations was -113.517 + 143.913 + -17.803 + 38.091 = $51 Mil.
Accounts Receivable was $447 Mil.
Revenue was 805.423 + 865.296 + 807.586 + 852.585 = $3,331 Mil.
Gross Profit was 185.726 + 191.402 + 203.71 + 233.038 = $814 Mil.
Total Current Assets was $1,440 Mil.
Total Assets was $2,749 Mil.
Property, Plant and Equipment(Net PPE) was $445 Mil.
Depreciation, Depletion and Amortization(DDA) was $69 Mil.
Selling, General & Admin. Expense(SGA) was $428 Mil.
Total Current Liabilities was $1,009 Mil.
Long-Term Debt was $0 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(395.103 / 3125.802) / (446.608 / 3330.89)
=0.12640052 / 0.13408068
=0.9427

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(385.301 / 3330.89) / (159.71 / 3125.802)
=0.2443419 / 0.30121678
=0.8112

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (1339.044 + 448.03) / 2499.63) / (1 - (1440.088 + 445.371) / 2749.392)
=0.28506459 / 0.31422693
=0.9072

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=3125.802 / 3330.89
=0.9384

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))
=(69.34 / (69.34 + 445.371)) / (70.18 / (70.18 + 448.03))
=0.13471637 / 0.13542772
=0.9947

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)
=(370.467 / 3125.802) / (427.728 / 3330.89)
=0.11851902 / 0.12841253
=0.923

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)
=((15 + 808.453) / 2499.63) / ((0.365 + 1009.466) / 2749.392)
=0.32942996 / 0.36729248
=0.8969

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(343.948 - -17.601 - 50.684) / 2499.63
=0.1244

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.

Babcock & Wilcox Co has a M-score of -2.10 signals that the company is likely to be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Babcock & Wilcox Co Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.99820.9576
GMI 0.76270.8522
AQI 0.97360.9044
SGI 1.11490.9933
DEPI 1.09270.99
SGAI 0.85830.8918
LVGI 0.91760.9351
TATA 0.02380.0865
M-score -2.34-2.20

Babcock & Wilcox Co Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 0.9590.85890.92560.99821.00031.05181.06490.95760.9427
GMI 1.12240.98970.96380.76270.870.98080.99240.85220.8112
AQI 0.95430.95420.99310.97360.95520.98361.00270.90440.9072
SGI 1.11371.12421.12971.11491.10051.0761.03250.99330.9384
DEPI 1.39212.30961.09661.09270.79090.49181.05210.990.9947
SGAI 0.95470.97580.96630.85830.86540.86940.90170.89180.923
LVGI 1.01940.96290.89640.91760.93440.95460.99870.93510.8969
TATA -0.01140.00050.0170.0238-0.0089-0.0128-0.01440.08650.1244
M-score -2.38-2.35-2.32-2.34-2.50-2.46-2.44-2.20-2.10
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