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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 -0.02. The lowest was -3.27. And the median was -2.61.
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 * 1.2913||+||0.528 * 1.475||+||0.404 * 0.6556||+||0.892 * 0.9496||+||0.115 * 1.0112|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 3.0075||+||4.679 * -0.0608||-||0.327 * 0.824|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $239 Mil.|
Revenue was 1134 + 1004 + 1115.8 + 927.4 = $4,181 Mil.
Gross Profit was 527 + 217 + 280.4 + 165 = $1,189 Mil.
Total Current Assets was $3,374 Mil.
Total Assets was $15,762 Mil.
Property, Plant and Equipment(Net PPE) was $9,413 Mil.
Depreciation, Depletion and Amortization(DDA) was $588 Mil.
Selling, General & Admin. Expense(SGA) was $425 Mil.
Total Current Liabilities was $773 Mil.
Long-Term Debt was $5,540 Mil.
Net Income was 47 + 26 + 26.5 + 90.9 = $190 Mil.
Non Operating Income was 0 + -2 + 13.1 + -12.7 = $-2 Mil.
Cash Flow from Operations was 100 + 346 + 132.2 + 572.5 = $1,151 Mil.
|Accounts Receivable was $195 Mil.
Revenue was 1311 + 954 + 1216.5 + 921.4 = $4,403 Mil.
Gross Profit was 686 + 416 + 444.3 + 301.1 = $1,847 Mil.
Total Current Assets was $1,366 Mil.
Total Assets was $10,998 Mil.
Property, Plant and Equipment(Net PPE) was $6,466 Mil.
Depreciation, Depletion and Amortization(DDA) was $408 Mil.
Selling, General & Admin. Expense(SGA) was $149 Mil.
Total Current Liabilities was $754 Mil.
Long-Term Debt was $4,593 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)|
|=||(239 / 4181.2)||/||(194.9 / 4402.9)|
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)|
|=||(1847.4 / 4402.9)||/||(1189.4 / 4181.2)|
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 - (3374 + 9413) / 15762)||/||(1 - (1366.4 + 6465.6) / 10998.4)|
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))|
|=||(408.4 / (408.4 + 6465.6))||/||(587.6 / (587.6 + 9413))|
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)|
|=||(424.7 / 4181.2)||/||(148.7 / 4402.9)|
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)|
|=||((5540 + 773) / 15762)||/||((4592.6 + 753.5) / 10998.4)|
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|
|=||(190.4 - -1.6||-||1150.7)||/||15762|
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 -2.72 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