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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 -3.31. And the median was -2.49.
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 * 0.9739||+||0.528 * 1.1547||+||0.404 * 0.8682||+||0.892 * 0.862||+||0.115 * 1.2252|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0416||+||4.679 * 0.0221||-||0.327 * 1.3026|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $157 Mil.|
Revenue was 921.4 + 1472.7 + 1132.6 + 1326.3 = $4,853 Mil.
Gross Profit was 301.1 + 590.3 + 442.8 + 593.8 = $1,928 Mil.
Total Current Assets was $3,339 Mil.
Total Assets was $11,660 Mil.
Property, Plant and Equipment(Net PPE) was $5,050 Mil.
Depreciation, Depletion and Amortization(DDA) was $395 Mil.
Selling, General & Admin. Expense(SGA) was $164 Mil.
Total Current Liabilities was $1,049 Mil.
Long-Term Debt was $4,592 Mil.
Net Income was 130.9 + 312.6 + 708.5 + 325.8 = $1,478 Mil.
Non Operating Income was -2.2 + -3.1 + 0.1 + 11 = $6 Mil.
Cash Flow from Operations was 621.6 + -194.7 + 750 + 37.5 = $1,214 Mil.
|Accounts Receivable was $187 Mil.
Revenue was 1097 + 1714.9 + 1336.5 + 1481.4 = $5,630 Mil.
Gross Profit was 386.1 + 865.2 + 675.1 + 656.2 = $2,583 Mil.
Total Current Assets was $3,060 Mil.
Total Assets was $10,799 Mil.
Property, Plant and Equipment(Net PPE) was $4,250 Mil.
Depreciation, Depletion and Amortization(DDA) was $415 Mil.
Selling, General & Admin. Expense(SGA) was $183 Mil.
Total Current Liabilities was $913 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)|
|=||(156.9 / 4853)||/||(186.9 / 5629.8)|
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)|
|=||(590.3 / 5629.8)||/||(301.1 / 4853)|
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 - (3338.7 + 5050.2) / 11659.8)||/||(1 - (3059.7 + 4250) / 10799)|
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))|
|=||(414.9 / (414.9 + 4250))||/||(395.3 / (395.3 + 5050.2))|
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)|
|=||(164.4 / 4853)||/||(183.1 / 5629.8)|
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)|
|=||((4592.4 + 1048.8) / 11659.8)||/||((3098 + 912.9) / 10799)|
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|
|=||(1477.8 - 5.8||-||1214.4)||/||11659.8|
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 -2.58 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