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Chesapeake Energy Corp (NYSE:CHK)
Beneish M-Score
-6.02 (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 -6.02 suggests that the company is not a manipulator.

CHK' s Beneish M-Score Range Over the Past 10 Years
Min: -18.99   Max: 1.4
Current: -6.02

-18.99
1.4

During the past 13 years, the highest Beneish M-Score of Chesapeake Energy Corp was 1.40. The lowest was -18.99. And the median was -2.74.


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 * 0.8902+0.528 * 2.002+0.404 * 2.1776+0.892 * 0.6406+0.115 * 0.7801
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1851+4.679 * -0.8132-0.327 * 1.8051
=-6.02

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

This Year (Mar16) TTM:Last Year (Mar15) TTM:
Accounts Receivable was $937 Mil.
Revenue was 1953 + 4078 + 2893 + 3033 = $11,957 Mil.
Gross Profit was 305 + 348 + 662 + 627 = $1,942 Mil.
Total Current Assets was $1,492 Mil.
Total Assets was $15,357 Mil.
Property, Plant and Equipment(Net PPE) was $13,291 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,810 Mil.
Selling, General & Admin. Expense(SGA) was $227 Mil.
Total Current Liabilities was $2,833 Mil.
Long-Term Debt was $10,062 Mil.
Net Income was -921 + -2185 + -4652 + -4108 = $-11,866 Mil.
Non Operating Income was 93 + 217 + -49 + -29 = $232 Mil.
Cash Flow from Operations was -421 + 179 + 318 + 314 = $390 Mil.
Accounts Receivable was $1,643 Mil.
Revenue was 2760 + 5050 + 5703 + 5152 = $18,665 Mil.
Gross Profit was 733 + 1942 + 1974 + 1420 = $6,069 Mil.
Total Current Assets was $5,398 Mil.
Total Assets was $34,373 Mil.
Property, Plant and Equipment(Net PPE) was $28,385 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,928 Mil.
Selling, General & Admin. Expense(SGA) was $299 Mil.
Total Current Liabilities was $5,366 Mil.
Long-Term Debt was $10,623 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)
=(937 / 11957) / (1643 / 18665)
=0.07836414 / 0.08802572
=0.8902

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)
=(6069 / 18665) / (1942 / 11957)
=0.32515403 / 0.16241532
=2.002

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 - (1492 + 13291) / 15357) / (1 - (5398 + 28385) / 34373)
=0.03737709 / 0.01716464
=2.1776

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
=11957 / 18665
=0.6406

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))
=(2928 / (2928 + 28385)) / (1810 / (1810 + 13291))
=0.09350749 / 0.11985961
=0.7801

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)
=(227 / 11957) / (299 / 18665)
=0.0189847 / 0.01601929
=1.1851

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)
=((10062 + 2833) / 15357) / ((10623 + 5366) / 34373)
=0.83968223 / 0.46516161
=1.8051

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
=(-11866 - 232 - 390) / 15357
=-0.8132

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 -6.02 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 0.68031.19370.82691.5111.22511.02150.84670.63550.82820.5684
GMI 1.30151.0961.07150.71851.67141.18141.04891.21161.03541.7593
AQI 1.71530.58520.790.98481.62941.1110.78380.66040.79381.77
SGI 1.57021.06481.49090.66231.2161.24231.05851.42141.19680.6092
DEPI 0.9840.95531.08721.06211.20080.95460.70740.96970.88130.61
SGAI 0.06231.64011.040610.67320.13980.97380.92230.6010.58871.1979
LVGI 0.82061.17560.97551.15090.91990.91871.0460.99640.94661.9369
TATA -0.1211-0.1162-0.1184-0.3328-0.0926-0.0995-0.1058-0.0835-0.0621-0.9251
M-score -2.17-3.08-2.79-5.73-1.71-2.54-3.16-2.79-2.74-7.23

Chesapeake Energy Corp Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
DSRI 0.63550.75810.7120.80970.82820.64940.770.77540.56840.8902
GMI 1.21191.25651.3991.1841.03521.00710.88951.05641.75932.002
AQI 0.66040.55560.63490.65580.79380.90511.44971.93191.772.1776
SGI 1.42151.4361.34221.23861.19670.97570.84390.67190.60920.6406
DEPI 0.96971.00510.99670.99020.88130.76310.6980.54760.610.7801
SGAI 0.60090.58280.66550.65560.58880.71930.80341.13531.19791.1851
LVGI 0.99640.96480.94430.97450.94661.06491.30891.68621.93691.8051
TATA -0.0909-0.0863-0.0967-0.082-0.062-0.1679-0.3222-0.6419-0.925-0.8132
M-score -2.82-2.68-2.75-2.80-2.74-3.64-4.32-5.88-7.23-6.02
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