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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 Chesapeake Energy Corp was 27.92. The lowest was -18.99. And the median was -2.55.
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 * 1.4287||+||0.528 * -0.7752||+||0.404 * 0.9203||+||0.892 * 0.4902||+||0.115 * 1.3348|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * -3.9081||+||4.679 * -0.5353||-||0.327 * 1.4093|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $893 Mil.|
Revenue was 2276 + 1622 + 1953 + 2649 = $8,500 Mil.
Gross Profit was 1622 + -267 + 305 + -5403 = $-3,743 Mil.
Total Current Assets was $1,067 Mil.
Total Assets was $12,523 Mil.
Property, Plant and Equipment(Net PPE) was $11,051 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,230 Mil.
Selling, General & Admin. Expense(SGA) was $-4,257 Mil.
Total Current Liabilities was $3,606 Mil.
Long-Term Debt was $9,022 Mil.
Net Income was -1155 + -1750 + -921 + -2185 = $-6,011 Mil.
Non Operating Income was 85 + 69 + 93 + 217 = $464 Mil.
Cash Flow from Operations was 376 + 95 + -421 + 179 = $229 Mil.
|Accounts Receivable was $1,275 Mil.
Revenue was 3376 + 3521 + 3218 + 7224 = $17,339 Mil.
Gross Profit was 2617 + 627 + 733 + 1942 = $5,919 Mil.
Total Current Assets was $3,579 Mil.
Total Assets was $21,286 Mil.
Property, Plant and Equipment(Net PPE) was $16,959 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,617 Mil.
Selling, General & Admin. Expense(SGA) was $2,222 Mil.
Total Current Liabilities was $4,557 Mil.
Long-Term Debt was $10,674 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)|
|=||(893 / 8500)||/||(1275 / 17339)|
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)|
|=||(5919 / 17339)||/||(-3743 / 8500)|
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 - (1067 + 11051) / 12523)||/||(1 - (3579 + 16959) / 21286)|
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))|
|=||(2617 / (2617 + 16959))||/||(1230 / (1230 + 11051))|
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)|
|=||(-4257 / 8500)||/||(2222 / 17339)|
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)|
|=||((9022 + 3606) / 12523)||/||((10674 + 4557) / 21286)|
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|
|=||(-6011 - 464||-||229)||/||12523|
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 -5.27 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
Chesapeake Energy Corp Annual Data
Chesapeake Energy Corp Quarterly Data