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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 1.67. The lowest was -18.99. And the median was -2.69.
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 * 0.7754||+||0.528 * 1.0612||+||0.404 * 1.9319||+||0.892 * 0.6719||+||0.115 * 0.5476|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1353||+||4.679 * -0.6416||-||0.327 * 1.6862|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $1,275 Mil.|
Revenue was 2893 + 3033 + 2760 + 5050 = $13,736 Mil.
Gross Profit was 687 + 661 + 761 + 1989 = $4,098 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 $267 Mil.
Total Current Liabilities was $4,557 Mil.
Long-Term Debt was $10,674 Mil.
Net Income was -4652 + -4108 + -3739 + 640 = $-11,859 Mil.
Non Operating Income was -49 + -29 + -1 + -6 = $-85 Mil.
Cash Flow from Operations was 318 + 314 + 423 + 829 = $1,884 Mil.
|Accounts Receivable was $2,447 Mil.
Revenue was 5703 + 5152 + 5046 + 4541 = $20,442 Mil.
Gross Profit was 2036 + 1492 + 1558 + 1386 = $6,472 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.
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)|
|=||(1275 / 13736)||/||(2447 / 20442)|
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)|
|=||(661 / 20442)||/||(687 / 13736)|
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 - (3579 + 16959) / 21286)||/||(1 - (3129 + 36652) / 40518)|
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))|
|=||(2895 / (2895 + 36652))||/||(2617 / (2617 + 16959))|
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)|
|=||(267 / 13736)||/||(350 / 20442)|
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)|
|=||((10674 + 4557) / 21286)||/||((11592 + 5602) / 40518)|
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|
|=||(-11859 - -85||-||1884)||/||21286|
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 -5.87 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