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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 -1.84. The lowest was -3.08. And the median was -2.68.
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 * 1.2462||+||0.528 * 1.0442||+||0.404 * 0.8489||+||0.892 * 0.9083||+||0.115 * 1.2471|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.6431||+||4.679 * -0.0392||-||0.327 * 1.0794|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $210 Mil.|
Revenue was 1115.8 + 927.4 + 1311.5 + 953.6 = $4,308 Mil.
Gross Profit was 280.4 + 165 + 685.9 + 415.8 = $1,547 Mil.
Total Current Assets was $1,127 Mil.
Total Assets was $12,739 Mil.
Property, Plant and Equipment(Net PPE) was $8,539 Mil.
Depreciation, Depletion and Amortization(DDA) was $480 Mil.
Selling, General & Admin. Expense(SGA) was $227 Mil.
Total Current Liabilities was $1,215 Mil.
Long-Term Debt was $5,593 Mil.
Net Income was 26.5 + 90.9 + 351.9 + 230.6 = $700 Mil.
Non Operating Income was 13.1 + -12.7 + -2.9 + -1.4 = $-4 Mil.
Cash Flow from Operations was 132.2 + 572.7 + -32.1 + 530.9 = $1,204 Mil.
|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 $2,531 Mil.
Total Assets was $11,254 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.
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)|
|=||(210.2 / 4308.3)||/||(185.7 / 4743.2)|
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)|
|=||(165 / 4743.2)||/||(280.4 / 4308.3)|
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 - (1127.1 + 8539) / 12738.9)||/||(1 - (2530.5 + 5525.8) / 11254.2)|
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))|
|=||(392.5 / (392.5 + 5525.8))||/||(479.6 / (479.6 + 8539))|
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)|
|=||(226.7 / 4308.3)||/||(151.9 / 4743.2)|
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)|
|=||((5592.7 + 1215.2) / 12738.9)||/||((4592.5 + 979.7) / 11254.2)|
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|
|=||(699.9 - -3.9||-||1203.7)||/||12738.9|
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 -2.66 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