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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 * 1.2637||+||0.528 * 1.5753||+||0.404 * 0.7846||+||0.892 * 0.8554||+||0.115 * 0.8109|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.818||+||4.679 * -0.0479||-||0.327 * 0.8025|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $227 Mil.|
Revenue was 867 + 680 + 1134 + 1004 = $3,685 Mil.
Gross Profit was 94 + 2 + 527 + 217 = $840 Mil.
Total Current Assets was $2,655 Mil.
Total Assets was $15,131 Mil.
Property, Plant and Equipment(Net PPE) was $9,652 Mil.
Depreciation, Depletion and Amortization(DDA) was $678 Mil.
Selling, General & Admin. Expense(SGA) was $353 Mil.
Total Current Liabilities was $686 Mil.
Long-Term Debt was $5,778 Mil.
Net Income was -320 + -30 + 47 + 26 = $-277 Mil.
Non Operating Income was -166 + -1 + 0 + -2 = $-169 Mil.
Cash Flow from Operations was 26 + 145 + 100 + 346 = $617 Mil.
|Accounts Receivable was $210 Mil.
Revenue was 1115 + 928 + 1311 + 954 = $4,308 Mil.
Gross Profit was 280 + 165 + 686 + 416 = $1,547 Mil.
Total Current Assets was $1,127 Mil.
Total Assets was $12,683 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 $5,537 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)|
|=||(227 / 3685)||/||(210 / 4308)|
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)|
|=||(1547 / 4308)||/||(840 / 3685)|
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 - (2655 + 9652) / 15131)||/||(1 - (1127 + 8539) / 12683)|
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))|
|=||(480 / (480 + 8539))||/||(678 / (678 + 9652))|
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)|
|=||(353 / 3685)||/||(227 / 4308)|
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)|
|=||((5778 + 686) / 15131)||/||((5537 + 1215) / 12683)|
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|
|=||(-277 - -169||-||617)||/||15131|
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 -2.47 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