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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 -2.11 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 * 1.0936||+||0.528 * 0.7421||+||0.404 * 0.9924||+||0.892 * 0.8696||+||0.115 * 1.0035|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9807||+||4.679 * 0.1131||-||0.327 * 0.9773|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $446 Mil.|
Revenue was 686.006 + 662.017 + 802.815 + 774.834 = $2,926 Mil.
Gross Profit was 173.698 + 159.71 + 385.301 + 196.44 = $915 Mil.
Total Current Assets was $1,330 Mil.
Total Assets was $2,626 Mil.
Property, Plant and Equipment(Net PPE) was $470 Mil.
Depreciation, Depletion and Amortization(DDA) was $72 Mil.
Selling, General & Admin. Expense(SGA) was $365 Mil.
Total Current Liabilities was $696 Mil.
Long-Term Debt was $260 Mil.
Net Income was 26.437 + 45.044 + 165.588 + 60.446 = $298 Mil.
Non Operating Income was 0.58 + 1.322 + -19.395 + -0.533 = $-18 Mil.
Cash Flow from Operations was 5.815 + -113.517 + 143.913 + -17.803 = $18 Mil.
|Accounts Receivable was $469 Mil.
Revenue was 886.136 + 805.423 + 865.296 + 807.586 = $3,364 Mil.
Gross Profit was 200.093 + 185.726 + 191.402 + 203.71 = $781 Mil.
Total Current Assets was $1,417 Mil.
Total Assets was $2,725 Mil.
Property, Plant and Equipment(Net PPE) was $444 Mil.
Depreciation, Depletion and Amortization(DDA) was $68 Mil.
Selling, General & Admin. Expense(SGA) was $429 Mil.
Total Current Liabilities was $1,015 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)|
|=||(446.086 / 2925.672)||/||(469.095 / 3364.441)|
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)|
|=||(159.71 / 3364.441)||/||(173.698 / 2925.672)|
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 - (1329.671 + 469.568) / 2626.053)||/||(1 - (1417.102 + 443.577) / 2725.309)|
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))|
|=||(68.023 / (68.023 + 443.577))||/||(71.722 / (71.722 + 469.568))|
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)|
|=||(365.448 / 2925.672)||/||(428.544 / 3364.441)|
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)|
|=||((260.05 + 695.688) / 2626.053)||/||((0.319 + 1014.623) / 2725.309)|
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|
|=||(297.515 - -18.026||-||18.408)||/||2626.053|
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 -2.11 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