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Chesapeake Energy Corp (NYSE:CHK)
Beneish M-Score
-2.78 (As of Today)

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.

Chesapeake Energy Corp has a M-score of -2.78 suggests that the company is not a manipulator.

CHK' s 10-Year Beneish M-Score Range
Min: -18.99   Max: 1.67
Current: -2.78

-18.99
1.67

During the past 13 years, the highest Beneish M-Score of Chesapeake Energy Corp was 1.67. The lowest was -18.99. And the median was -2.66.


Definition

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 Chesapeake Energy Corp 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 * 0.8097+0.528 * 1.184+0.404 * 0.6558+0.892 * 1.2386+0.115 * 0.9902
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.6496+4.679 * -0.0784-0.327 * 0.9745
=-2.78

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $2,447 Mil.
Revenue was 5703 + 5152 + 5046 + 4541 = $20,442 Mil.
Gross Profit was 1974 + 1420 + 1508 + 1330 = $6,232 Mil.
Total Current Assets was $3,129 Mil.
Total Assets was $40,518 Mil.
Property, Plant and Equipment(Net PPE) was $36,652 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,895 Mil.
Selling, General & Admin. Expense(SGA) was $350 Mil.
Total Current Liabilities was $5,602 Mil.
Long-Term Debt was $11,592 Mil.
Net Income was 662 + 191 + 425 + -116 = $1,162 Mil.
Non Operating Income was -28 + -212 + 52 + -305 = $-493 Mil.
Cash Flow from Operations was 1162 + 1352 + 1291 + 1028 = $4,833 Mil.
Accounts Receivable was $2,440 Mil.
Revenue was 4867 + 4675 + 3424 + 3538 = $16,504 Mil.
Gross Profit was 1303 + 2123 + 1164 + 1367 = $5,957 Mil.
Total Current Assets was $3,994 Mil.
Total Assets was $42,288 Mil.
Property, Plant and Equipment(Net PPE) was $37,121 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,901 Mil.
Selling, General & Admin. Expense(SGA) was $435 Mil.
Total Current Liabilities was $5,678 Mil.
Long-Term Debt was $12,736 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(2447 / 20442) / (2440 / 16504)
=0.11970453 / 0.14784295
=0.8097

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1420 / 16504) / (1974 / 20442)
=0.3609428 / 0.30486254
=1.184

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (3129 + 36652) / 40518) / (1 - (3994 + 37121) / 42288)
=0.01818945 / 0.02773837
=0.6558

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=20442 / 16504
=1.2386

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))
=(2901 / (2901 + 37121)) / (2895 / (2895 + 36652))
=0.07248513 / 0.07320404
=0.9902

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)
=(350 / 20442) / (435 / 16504)
=0.01712161 / 0.02635725
=0.6496

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)
=((11592 + 5602) / 40518) / ((12736 + 5678) / 42288)
=0.42435461 / 0.43544268
=0.9745

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(1162 - -493 - 4833) / 40518
=-0.0784

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.

Chesapeake Energy Corp has a M-score of -2.78 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Chesapeake Energy Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.25141.08450.68021.19380.82691.5111.22511.02150.78180.6883
GMI 1.42481.00730.89491.0960.73681.61821.07931.18141.04891.2116
AQI 1.33291.15021.71530.58520.790.98481.62941.09890.79240.6604
SGI 1.57751.72191.57041.06471.49090.66231.2161.24231.05851.4214
DEPI 1.12281.23430.98430.95531.08861.06071.20080.95510.7070.9697
SGAI 0.06070.89471.3831.64210.71520.13571.06740.97380.92230.601
LVGI 0.87130.9440.82061.17560.97551.15090.91990.91871.05910.9841
TATA -0.1083-0.0862-0.1211-0.1162-0.1181-0.3328-0.0926-0.0995-0.1058-0.0835
M-score -1.66-2.03-2.61-3.08-4.63-3.44-2.18-2.55-3.22-2.74

Chesapeake Energy Corp Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.59440.79170.78170.8570.97520.74240.68820.75810.7120.8097
GMI 1.47441.59171.5611.34311.15191.13811.21191.25651.3991.184
AQI 0.59280.84540.79240.75941.19520.86950.66040.55560.63490.6558
SGI 1.3191.05731.05861.07071.16741.43451.42151.4361.34221.2386
DEPI 0.96650.78570.7070.69780.70880.84790.96971.00510.99670.9902
SGAI 0.15430.18880.17430.24750.67940.52830.60090.58280.6640.6496
LVGI 1.00661.0851.05911.04531.03070.89540.98410.96480.94430.9745
TATA -0.0792-0.1305-0.1112-0.1171-0.1154-0.0732-0.0836-0.0839-0.0942-0.0784
M-score -2.71-2.89-2.85-2.93-2.72-2.55-2.74-2.67-2.74-2.78
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