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Babcock & Wilcox Co (NYSE:BWC)
Beneish M-Score
-2.07 (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 -2.07 signals that the company is a manipulator.

BWC' s 10-Year Beneish M-Score Range
Min: -2.39   Max: -2.07
Current: -2.07

-2.39
-2.07

During the past 7 years, the highest Beneish M-Score of Babcock & Wilcox Co was -2.07. The lowest was -2.39. And the median was -2.27.


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 * 1.3089+0.528 * 1.6842+0.404 * 1.1929+0.892 * 0.8941+0.115 * 0.6986
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.3048+4.679 * -0.0211-0.327 * 1.0877
=-2.07

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $475 Mil.
Revenue was 837.094 + 737.902 + 686.006 + 662.017 = $2,923 Mil.
Gross Profit was -3.053 + 183.288 + 173.698 + 159.71 = $514 Mil.
Total Current Assets was $1,474 Mil.
Total Assets was $2,857 Mil.
Property, Plant and Equipment(Net PPE) was $437 Mil.
Depreciation, Depletion and Amortization(DDA) was $106 Mil.
Selling, General & Admin. Expense(SGA) was $443 Mil.
Total Current Liabilities was $820 Mil.
Long-Term Debt was $285 Mil.
Net Income was -103.307 + 61.214 + 26.437 + 45.044 = $29 Mil.
Non Operating Income was -5.888 + 18.625 + 0.58 + 1.322 = $15 Mil.
Cash Flow from Operations was 160.12 + 22.507 + 5.815 + -113.517 = $75 Mil.
Accounts Receivable was $406 Mil.
Revenue was 802.815 + 774.834 + 886.136 + 805.423 = $3,269 Mil.
Gross Profit was 385.301 + 196.44 + 200.093 + 185.726 = $968 Mil.
Total Current Assets was $1,437 Mil.
Total Assets was $2,609 Mil.
Property, Plant and Equipment(Net PPE) was $447 Mil.
Depreciation, Depletion and Amortization(DDA) was $71 Mil.
Selling, General & Admin. Expense(SGA) was $379 Mil.
Total Current Liabilities was $927 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)
=(474.899 / 2923.019) / (405.803 / 3269.208)
=0.16246867 / 0.12412884
=1.3089

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)
=(183.288 / 3269.208) / (-3.053 / 2923.019)
=0.29596159 / 0.17572346
=1.6842

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 - (1473.802 + 436.635) / 2856.936) / (1 - (1437.424 + 447.079) / 2609.153)
=0.33129864 / 0.27773381
=1.1929

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
=2923.019 / 3269.208
=0.8941

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))
=(70.525 / (70.525 + 447.079)) / (105.798 / (105.798 + 436.635))
=0.13625281 / 0.19504344
=0.6986

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)
=(442.615 / 2923.019) / (379.382 / 3269.208)
=0.15142392 / 0.11604707
=1.3048

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)
=((285 + 819.636) / 2856.936) / ((0.225 + 927.228) / 2609.153)
=0.38665059 / 0.35546133
=1.0877

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
=(29.388 - 14.639 - 74.925) / 2856.936
=-0.0211

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 -2.07 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

Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.99820.95761.3089
GMI 0.76270.85221.6842
AQI 0.97360.90441.1929
SGI 1.11490.99330.8941
DEPI 1.09270.990.6986
SGAI 0.85830.89181.3048
LVGI 0.91760.93511.0877
TATA 0.02380.0865-0.0211
M-score -2.34-2.20-2.07

Babcock & Wilcox Co Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 0.92560.99821.00031.05181.06490.95760.94271.09361.18121.3089
GMI 0.96380.76270.870.98080.99240.85220.81120.74210.74371.6842
AQI 0.99310.97360.95520.98361.00270.90440.90720.99240.9791.1929
SGI 1.12971.11491.10051.0761.03250.99330.93840.86960.8670.8941
DEPI 1.09661.09270.79090.49181.05210.990.99471.00350.93870.6986
SGAI 0.96630.85830.86540.86940.90170.89180.9230.98071.00261.3048
LVGI 0.89640.91760.93440.95460.99870.93510.89690.97731.04981.0877
TATA 0.0170.0238-0.0089-0.0128-0.01440.08650.12440.11310.0897-0.0211
M-score -2.32-2.34-2.50-2.46-2.44-2.20-2.10-2.11-2.18-2.07
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