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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.
Chesapeake Energy Corp has a M-score of -2.75 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Chesapeake Energy Corp was 5.69. The lowest was -18.99. And the median was -2.68.
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 * 0.712||+||0.528 * 1.399||+||0.404 * 0.6349||+||0.892 * 1.3422||+||0.115 * 0.9967|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.664||+||4.679 * -0.0967||-||0.327 * 0.9443|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $2,310 Mil.|
Revenue was 5152 + 5046 + 4541 + 4867 = $19,606 Mil.
Gross Profit was 1420 + 1508 + 1330 + 1303 = $5,561 Mil.
Total Current Assets was $4,370 Mil.
Total Assets was $41,127 Mil.
Property, Plant and Equipment(Net PPE) was $36,011 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,901 Mil.
Selling, General & Admin. Expense(SGA) was $410 Mil.
Total Current Liabilities was $5,792 Mil.
Long-Term Debt was $11,549 Mil.
Net Income was 191 + 425 + -116 + 202 = $702 Mil.
Non Operating Income was -212 + 52 + -184 + -27 = $-371 Mil.
Cash Flow from Operations was 1352 + 1291 + 1053 + 1356 = $5,052 Mil.
|Accounts Receivable was $2,417 Mil.
Revenue was 4675 + 3424 + 3538 + 2970 = $14,607 Mil.
Gross Profit was 2123 + 1164 + 1367 + 1142 = $5,796 Mil.
Total Current Assets was $3,592 Mil.
Total Assets was $42,145 Mil.
Property, Plant and Equipment(Net PPE) was $37,349 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,998 Mil.
Selling, General & Admin. Expense(SGA) was $460 Mil.
Total Current Liabilities was $5,620 Mil.
Long-Term Debt was $13,198 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)|
|=||(2310 / 19606)||/||(2417 / 14607)|
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)|
|=||(1508 / 14607)||/||(1420 / 19606)|
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 - (4370 + 36011) / 41127)||/||(1 - (3592 + 37349) / 42145)|
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))|
|=||(2998 / (2998 + 37349))||/||(2901 / (2901 + 36011))|
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)|
|=||(410 / 19606)||/||(460 / 14607)|
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)|
|=||((11549 + 5792) / 41127)||/||((13198 + 5620) / 42145)|
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|
|=||(702 - -371||-||5052)||/||41127|
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 -2.75 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