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Chesapeake Energy Corp (NYSE:CHK)
Beneish M-Score
-2.68 (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 -2.68 suggests that the company is not a manipulator.

CHK' s 10-Year Beneish M-Score Range
Min: -18.99   Max: 1.67
Current: -2.68

-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 * 0.7581+0.528 * 1.2565+0.404 * 0.5556+0.892 * 1.436+0.115 * 1.0051
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.5828+4.679 * -0.0863-0.327 * 0.9648
=-2.68

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

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $2,593 Mil.
Revenue was 5046 + 4541 + 4867 + 4675 = $19,129 Mil.
Gross Profit was 1508 + 1330 + 1303 + 2123 = $6,264 Mil.
Total Current Assets was $4,275 Mil.
Total Assets was $42,605 Mil.
Property, Plant and Equipment(Net PPE) was $37,522 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,883 Mil.
Selling, General & Admin. Expense(SGA) was $426 Mil.
Total Current Liabilities was $5,958 Mil.
Long-Term Debt was $12,653 Mil.
Net Income was 425 + -116 + 202 + 580 = $1,091 Mil.
Non Operating Income was 52 + -184 + -27 + -54 = $-213 Mil.
Cash Flow from Operations was 1291 + 1053 + 1356 + 1281 = $4,981 Mil.
Accounts Receivable was $2,382 Mil.
Revenue was 3424 + 3538 + 2970 + 3389 = $13,321 Mil.
Gross Profit was 1164 + 1367 + 1142 + 1808 = $5,481 Mil.
Total Current Assets was $2,884 Mil.
Total Assets was $42,481 Mil.
Property, Plant and Equipment(Net PPE) was $38,147 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,947 Mil.
Selling, General & Admin. Expense(SGA) was $509 Mil.
Total Current Liabilities was $5,785 Mil.
Long-Term Debt was $13,449 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)
=(2593 / 19129) / (2382 / 13321)
=0.13555335 / 0.1788154
=0.7581

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)
=(1330 / 13321) / (1508 / 19129)
=0.4114556 / 0.32746092
=1.2565

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 - (4275 + 37522) / 42605) / (1 - (2884 + 38147) / 42481)
=0.01896491 / 0.03413291
=0.5556

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
=19129 / 13321
=1.436

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))
=(2947 / (2947 + 38147)) / (2883 / (2883 + 37522))
=0.07171363 / 0.07135256
=1.0051

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)
=(426 / 19129) / (509 / 13321)
=0.02226985 / 0.03821034
=0.5828

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)
=((12653 + 5958) / 42605) / ((13449 + 5785) / 42481)
=0.43682666 / 0.45276712
=0.9648

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
=(1091 - -213 - 4981) / 42605
=-0.0863

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 -2.68 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 1.206310.68021.19380.82691.5111.22511.02150.84670.6963
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 -1.71-2.11-2.61-3.08-4.63-3.44-2.18-2.55-3.16-2.73

Chesapeake Energy Corp Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 1.02160.73670.59440.79170.84660.8570.97520.74240.69630.7581
GMI 0.7940.96781.47441.59171.5611.34311.15191.13811.21191.2565
AQI 1.09891.0110.59280.84540.79240.75941.19520.86950.66040.5556
SGI 1.24221.52091.3191.05731.05861.07071.16741.43451.42151.436
DEPI 0.95511.07070.96650.78570.7070.69780.70880.84790.96971.0051
SGAI 5.15380.86570.15430.18880.17430.24750.67940.52830.60090.5828
LVGI 0.91871.03351.00661.0851.05911.04531.03070.89540.98410.9648
TATA -0.0995-0.0821-0.0792-0.1305-0.1112-0.1171-0.1154-0.0722-0.086-0.0863
M-score -3.47-2.63-2.71-2.89-2.79-2.93-2.72-2.55-2.74-2.68
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