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Chesapeake Energy Corp (NYSE:CHK)
Beneish M-Score
-2.75 (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 -2.75 suggests that the company is not a manipulator.

CHK' s 10-Year Beneish M-Score Range
Min: -18.99   Max: 5.69
Current: -2.75

-18.99
5.69

During the past 13 years, the highest Beneish M-Score of Chesapeake Energy Corp was 5.69. The lowest was -18.99. And the median was -2.68.


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 * 0.712+0.528 * 1.399+0.404 * 0.6349+0.892 * 1.3422+0.115 * 0.9967
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.664+4.679 * -0.0967-0.327 * 0.9443
=-2.75

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $2,310 Mil.
Revenue was 5152 + 5046 + 4541 + 4867 = $19,606 Mil.
Gross Profit was 1420 + 1508 + 1330 + 1303 = $5,561 Mil.
Total Current Assets was $4,370 Mil.
Total Assets was $41,127 Mil.
Property, Plant and Equipment(Net PPE) was $36,011 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,901 Mil.
Selling, General & Admin. Expense(SGA) was $410 Mil.
Total Current Liabilities was $5,792 Mil.
Long-Term Debt was $11,549 Mil.
Net Income was 191 + 425 + -116 + 202 = $702 Mil.
Non Operating Income was -212 + 52 + -184 + -27 = $-371 Mil.
Cash Flow from Operations was 1352 + 1291 + 1053 + 1356 = $5,052 Mil.
Accounts Receivable was $2,417 Mil.
Revenue was 4675 + 3424 + 3538 + 2970 = $14,607 Mil.
Gross Profit was 2123 + 1164 + 1367 + 1142 = $5,796 Mil.
Total Current Assets was $3,592 Mil.
Total Assets was $42,145 Mil.
Property, Plant and Equipment(Net PPE) was $37,349 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,998 Mil.
Selling, General & Admin. Expense(SGA) was $460 Mil.
Total Current Liabilities was $5,620 Mil.
Long-Term Debt was $13,198 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)
=(2310 / 19606) / (2417 / 14607)
=0.11782108 / 0.16546861
=0.712

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)
=(1508 / 14607) / (1420 / 19606)
=0.39679606 / 0.28363766
=1.399

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 - (4370 + 36011) / 41127) / (1 - (3592 + 37349) / 42145)
=0.01813894 / 0.02856804
=0.6349

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
=19606 / 14607
=1.3422

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))
=(2998 / (2998 + 37349)) / (2901 / (2901 + 36011))
=0.0743054 / 0.07455284
=0.9967

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)
=(410 / 19606) / (460 / 14607)
=0.02091197 / 0.03149175
=0.664

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)
=((11549 + 5792) / 41127) / ((13198 + 5620) / 42145)
=0.42164515 / 0.44650611
=0.9443

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
=(702 - -371 - 5052) / 41127
=-0.0967

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 -2.75 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 1.24120.97750.75461.19390.82691.5111.22511.02150.78180.6883
GMI 1.08180.99181.30151.0960.73681.04491.67141.18141.04891.2116
AQI 1.33291.15061.71510.58510.790.98481.62941.09890.79240.6604
SGI 1.57751.7221.57021.06481.49090.66231.2161.24231.05851.4214
DEPI 1.12281.23460.9840.95531.08861.06071.20080.95510.7070.9697
SGAI 0.87871.04240.06231.640110.71521.03650.13980.97380.92230.601
LVGI 0.87130.94390.82061.17570.97551.15090.91990.91871.05910.9841
TATA -0.1097-0.0861-0.1211-0.1162-0.1181-0.3328-0.0926-0.0995-0.1058-0.0835
M-score -2.00-2.16-2.10-3.08-4.63-3.90-1.71-2.55-3.22-2.74

Chesapeake Energy Corp Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.73670.59440.79170.78170.8570.97520.74240.68820.75810.712
GMI 0.96781.47441.59171.5611.34311.15191.13811.21191.25651.399
AQI 1.0110.59280.84540.79240.75941.19520.86950.66040.55560.6349
SGI 1.52091.3191.05731.05861.07071.16741.43451.42151.4361.3422
DEPI 1.07070.96650.78570.7070.69780.70880.84790.96971.00510.9967
SGAI 0.86570.15430.18880.17430.24750.67940.52830.60090.58280.664
LVGI 1.03351.00661.0851.05911.04531.03070.89540.98410.96480.9443
TATA -0.0821-0.0792-0.1305-0.1112-0.1171-0.1154-0.0722-0.086-0.0863-0.0967
M-score -2.63-2.71-2.89-2.85-2.93-2.72-2.55-2.75-2.68-2.75
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