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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 * 1.1827||+||0.528 * 2.6997||+||0.404 * 1.9456||+||0.892 * 0.5363||+||0.115 * 0.9497|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.469||+||4.679 * -0.7421||-||0.327 * 1.6656|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $952 Mil.|
Revenue was 1622 + 1953 + 4078 + 2893 = $10,546 Mil.
Gross Profit was -267 + 305 + 348 + 662 = $1,048 Mil.
Total Current Assets was $1,204 Mil.
Total Assets was $13,487 Mil.
Property, Plant and Equipment(Net PPE) was $11,593 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,469 Mil.
Selling, General & Admin. Expense(SGA) was $219 Mil.
Total Current Liabilities was $3,777 Mil.
Long-Term Debt was $8,621 Mil.
Net Income was -1750 + -921 + -2185 + -4652 = $-9,508 Mil.
Non Operating Income was 69 + 93 + 217 + -49 = $330 Mil.
Cash Flow from Operations was 95 + -421 + 179 + 318 = $171 Mil.
|Accounts Receivable was $1,501 Mil.
Revenue was 3521 + 3218 + 7224 + 5703 = $19,666 Mil.
Gross Profit was 627 + 733 + 1942 + 1974 = $5,276 Mil.
Total Current Assets was $4,231 Mil.
Total Assets was $28,598 Mil.
Property, Plant and Equipment(Net PPE) was $23,615 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,824 Mil.
Selling, General & Admin. Expense(SGA) was $278 Mil.
Total Current Liabilities was $5,128 Mil.
Long-Term Debt was $10,655 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)|
|=||(952 / 10546)||/||(1501 / 19666)|
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)|
|=||(5276 / 19666)||/||(1048 / 10546)|
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 - (1204 + 11593) / 13487)||/||(1 - (4231 + 23615) / 28598)|
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))|
|=||(2824 / (2824 + 23615))||/||(1469 / (1469 + 11593))|
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)|
|=||(219 / 10546)||/||(278 / 19666)|
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)|
|=||((8621 + 3777) / 13487)||/||((10655 + 5128) / 28598)|
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|
|=||(-9508 - 330||-||171)||/||13487|
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 -5.22 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