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Chesapeake Energy Corp (NYSE:CHK)
Beneish M-Score
-7.05 (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 -7.05 suggests that the company is not a manipulator.

CHK' s Beneish M-Score Range Over the Past 10 Years
Min: -9.65   Max: 1.4
Current: -7.05

-9.65
1.4

During the past 13 years, the highest Beneish M-Score of Chesapeake Energy Corp was 1.40. The lowest was -9.65. And the median was -2.97.


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 * 0.941+0.528 * 1.5939+0.404 * 1.77+0.892 * 0.552+0.115 * 0.61
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.3222+4.679 * -0.925-0.327 * 1.9608
=-7.05

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

This Year (Dec15) TTM:Last Year (Dec14) TTM:
Accounts Receivable was $696 Mil.
Revenue was 4078 + 2893 + 3033 + 2760 = $12,764 Mil.
Gross Profit was 348 + 662 + 627 + 733 = $2,370 Mil.
Total Current Assets was $2,480 Mil.
Total Assets was $17,357 Mil.
Property, Plant and Equipment(Net PPE) was $14,298 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,229 Mil.
Selling, General & Admin. Expense(SGA) was $235 Mil.
Total Current Liabilities was $3,685 Mil.
Long-Term Debt was $10,354 Mil.
Net Income was -2185 + -4652 + -4108 + -3739 = $-14,684 Mil.
Non Operating Income was 217 + -49 + -29 + -1 = $138 Mil.
Cash Flow from Operations was 179 + 318 + 314 + 423 = $1,234 Mil.
Accounts Receivable was $1,340 Mil.
Revenue was 7224 + 5703 + 5152 + 5046 = $23,125 Mil.
Gross Profit was 1942 + 1974 + 1420 + 1508 = $6,844 Mil.
Total Current Assets was $7,468 Mil.
Total Assets was $40,751 Mil.
Property, Plant and Equipment(Net PPE) was $32,515 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,915 Mil.
Selling, General & Admin. Expense(SGA) was $322 Mil.
Total Current Liabilities was $5,656 Mil.
Long-Term Debt was $11,154 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)
=(696 / 12764) / (1340 / 23125)
=0.05452836 / 0.05794595
=0.941

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)
=(662 / 23125) / (348 / 12764)
=0.29595676 / 0.18567847
=1.5939

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 - (2480 + 14298) / 17357) / (1 - (7468 + 32515) / 40751)
=0.0333583 / 0.01884616
=1.77

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
=12764 / 23125
=0.552

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))
=(2915 / (2915 + 32515)) / (2229 / (2229 + 14298))
=0.08227491 / 0.13487021
=0.61

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)
=(235 / 12764) / (322 / 23125)
=0.01841116 / 0.01392432
=1.3222

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)
=((10354 + 3685) / 17357) / ((11154 + 5656) / 40751)
=0.80883793 / 0.41250521
=1.9608

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
=(-14684 - 138 - 1234) / 17357
=-0.925

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 -7.05 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

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.68021.19380.82691.5111.22511.02150.78180.62590.55010.941
GMI 0.89491.0960.73681.61821.07931.18141.04891.32051.04851.5939
AQI 1.71530.58520.790.98481.62941.09890.79240.66040.79381.77
SGI 1.57041.06471.49090.66231.2161.24231.05851.54921.2120.552
DEPI 0.98430.95531.08861.06071.20080.95510.7070.96970.88130.61
SGAI 1.3831.64210.71520.13571.06740.97380.92230.55140.58131.3222
LVGI 0.82061.17560.97551.15090.91990.91871.05910.98240.93661.9608
TATA -0.1211-0.1162-0.1181-0.3328-0.0926-0.0995-0.1058-0.0835-0.0621-0.9251
M-score -2.61-3.08-4.63-3.44-2.18-2.55-3.22-2.61-2.97-7.05

Chesapeake Energy Corp Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
DSRI 0.74240.62580.70040.65910.75180.55010.62950.73520.7210.941
GMI 1.13811.32081.35991.51131.27511.04831.03890.93161.13611.5939
AQI 0.86950.66040.55560.63490.65580.79380.90511.44971.93191.77
SGI 1.43451.54931.55421.451.3341.21191.00660.88390.72270.552
DEPI 0.84790.96971.00510.99670.99020.88130.76310.6980.54760.61
SGAI 0.52830.55140.53850.61470.60320.58140.69730.76721.05561.3222
LVGI 0.89540.98240.96480.94430.97450.93661.06491.30891.68621.9608
TATA -0.0732-0.0836-0.0839-0.0947-0.0786-0.0621-0.1679-0.3216-0.6416-0.925
M-score -2.55-2.61-2.55-2.63-2.70-2.97-3.61-4.28-5.82-7.05
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