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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 -2.60.
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 * 1.642||+||0.528 * 1.2406||+||0.404 * 0.6974||+||0.892 * 0.9549||+||0.115 * 1.1905|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.7124||+||4.679 * -0.0333||-||0.327 * 0.8505|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $262 Mil.|
Revenue was 1004 + 1115.8 + 927.4 + 1311.5 = $4,359 Mil.
Gross Profit was 217 + 280.4 + 165 + 685.9 = $1,348 Mil.
Total Current Assets was $3,520 Mil.
Total Assets was $15,581 Mil.
Property, Plant and Equipment(Net PPE) was $9,052 Mil.
Depreciation, Depletion and Amortization(DDA) was $511 Mil.
Selling, General & Admin. Expense(SGA) was $246 Mil.
Total Current Liabilities was $1,273 Mil.
Long-Term Debt was $5,539 Mil.
Net Income was 26 + 26.5 + 90.9 + 351.9 = $495 Mil.
Non Operating Income was -2 + 13.1 + -12.7 + -2.9 = $-5 Mil.
Cash Flow from Operations was 346 + 132.2 + 572.7 + -32.2 = $1,019 Mil.
|Accounts Receivable was $167 Mil.
Revenue was 954 + 1216.5 + 921.4 + 1472.7 = $4,565 Mil.
Gross Profit was 416 + 444.3 + 301.1 + 590.3 = $1,752 Mil.
Total Current Assets was $2,380 Mil.
Total Assets was $11,485 Mil.
Property, Plant and Equipment(Net PPE) was $5,925 Mil.
Depreciation, Depletion and Amortization(DDA) was $402 Mil.
Selling, General & Admin. Expense(SGA) was $150 Mil.
Total Current Liabilities was $1,311 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)|
|=||(262 / 4358.7)||/||(167.1 / 4564.6)|
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)|
|=||(1751.7 / 4564.6)||/||(1348.3 / 4358.7)|
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 - (3520 + 9052) / 15581)||/||(1 - (2379.7 + 5925) / 11485.3)|
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))|
|=||(402.2 / (402.2 + 5925))||/||(510.6 / (510.6 + 9052))|
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)|
|=||(245.6 / 4358.7)||/||(150.2 / 4564.6)|
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)|
|=||((5539 + 1273) / 15581)||/||((4592.5 + 1311.3) / 11485.3)|
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|
|=||(495.3 - -4.5||-||1018.7)||/||15581|
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 -2.13 signals that the company is likely to 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