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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.
Babcock & Wilcox Co has a M-score of -2.18 signals that the company is a manipulator.
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 -2.35.
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 * 1.1812||+||0.528 * 0.7437||+||0.404 * 0.979||+||0.892 * 0.867||+||0.115 * 0.9387|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0026||+||4.679 * 0.0897||-||0.327 * 1.0498|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $491 Mil.|
Revenue was 737.902 + 686.006 + 662.017 + 802.815 = $2,889 Mil.
Gross Profit was 183.288 + 173.698 + 159.71 + 385.301 = $902 Mil.
Total Current Assets was $1,372 Mil.
Total Assets was $2,657 Mil.
Property, Plant and Equipment(Net PPE) was $463 Mil.
Depreciation, Depletion and Amortization(DDA) was $77 Mil.
Selling, General & Admin. Expense(SGA) was $372 Mil.
Total Current Liabilities was $711 Mil.
Long-Term Debt was $299 Mil.
Net Income was 61.214 + 26.437 + 45.044 + 165.588 = $298 Mil.
Non Operating Income was 18.625 + 0.58 + 1.322 + -19.395 = $1 Mil.
Cash Flow from Operations was 22.507 + 5.815 + -113.517 + 143.913 = $59 Mil.
|Accounts Receivable was $479 Mil.
Revenue was 774.834 + 886.136 + 805.423 + 865.296 = $3,332 Mil.
Gross Profit was 196.44 + 200.093 + 185.726 + 191.402 = $774 Mil.
Total Current Assets was $1,430 Mil.
Total Assets was $2,740 Mil.
Property, Plant and Equipment(Net PPE) was $444 Mil.
Depreciation, Depletion and Amortization(DDA) was $68 Mil.
Selling, General & Admin. Expense(SGA) was $428 Mil.
Total Current Liabilities was $992 Mil.
Long-Term Debt was $0 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)|
|=||(490.927 / 2888.74)||/||(479.34 / 3331.689)|
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)|
|=||(173.698 / 3331.689)||/||(183.288 / 2888.74)|
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 - (1371.859 + 463.126) / 2656.77)||/||(1 - (1430.161 + 443.941) / 2739.664)|
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))|
|=||(68.22 / (68.22 + 443.941))||/||(76.584 / (76.584 + 463.126))|
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)|
|=||(371.859 / 2888.74)||/||(427.777 / 3331.689)|
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)|
|=||((298.776 + 711.12) / 2656.77)||/||((0.276 + 991.764) / 2739.664)|
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|
|=||(298.283 - 1.132||-||58.718)||/||2656.77|
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 -2.18 signals that the company is likely to 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
Babcock & Wilcox Co Annual Data
Babcock & Wilcox Co Quarterly Data