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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 CF Industries Holdings Inc was -1.76. The lowest was -3.21. And the median was -2.69.
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 CF Industries Holdings 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 * 0.9526||+||0.528 * 1.2277||+||0.404 * 0.7632||+||0.892 * 0.8664||+||0.115 * 1.3721|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0562||+||4.679 * -0.0008||-||0.327 * 1.3365|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $186 Mil.|
Revenue was 1216.5 + 921.4 + 1472.7 + 1132.6 = $4,743 Mil.
Gross Profit was 444.3 + 301.1 + 590.3 + 442.8 = $1,779 Mil.
Total Current Assets was $2,615 Mil.
Total Assets was $11,338 Mil.
Property, Plant and Equipment(Net PPE) was $5,526 Mil.
Depreciation, Depletion and Amortization(DDA) was $393 Mil.
Selling, General & Admin. Expense(SGA) was $152 Mil.
Total Current Liabilities was $980 Mil.
Long-Term Debt was $4,593 Mil.
Net Income was 238.3 + 130.9 + 312.6 + 708.5 = $1,390 Mil.
Non Operating Income was -3.8 + -2.2 + -3.1 + 0.1 = $-9 Mil.
Cash Flow from Operations was 231.7 + 621.6 + -194.7 + 750 = $1,409 Mil.
|Accounts Receivable was $225 Mil.
Revenue was 1326.3 + 1097 + 1714.9 + 1336.5 = $5,475 Mil.
Gross Profit was 593.8 + 386.1 + 865.2 + 675.1 = $2,520 Mil.
Total Current Assets was $2,630 Mil.
Total Assets was $10,678 Mil.
Property, Plant and Equipment(Net PPE) was $4,102 Mil.
Depreciation, Depletion and Amortization(DDA) was $411 Mil.
Selling, General & Admin. Expense(SGA) was $166 Mil.
Total Current Liabilities was $828 Mil.
Long-Term Debt was $3,098 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)|
|=||(185.7 / 4743.2)||/||(225 / 5474.7)|
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)|
|=||(301.1 / 5474.7)||/||(444.3 / 4743.2)|
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 - (2614.5 + 5525.8) / 11338.2)||/||(1 - (2630.1 + 4101.7) / 10678.1)|
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))|
|=||(410.6 / (410.6 + 4101.7))||/||(392.5 / (392.5 + 5525.8))|
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)|
|=||(151.9 / 4743.2)||/||(166 / 5474.7)|
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)|
|=||((4592.5 + 979.7) / 11338.2)||/||((3098.1 + 828.3) / 10678.1)|
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|
|=||(1390.3 - -9||-||1408.6)||/||11338.2|
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.
CF Industries Holdings Inc has a M-score of -2.70 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
CF Industries Holdings Inc Annual Data
CF Industries Holdings Inc Quarterly Data