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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 7 years, the highest Beneish M-Score of Chesapeake Lodging Trust was -2.23. The lowest was -2.68. And the median was -2.43.
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 Lodging Trust 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 * 1.2031||+||0.528 * 0.995||+||0.404 * 1.0094||+||0.892 * 1.0636||+||0.115 * 0.9158|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9986||+||4.679 * -0.041||-||0.327 * 0.9881|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $20.0 Mil.|
Revenue was 145.128 + 164.529 + 169.431 + 140.611 = $619.7 Mil.
Gross Profit was 44.205 + 57.138 + 62.752 + 40.206 = $204.3 Mil.
Total Current Assets was $116.7 Mil.
Total Assets was $2,035.4 Mil.
Property, Plant and Equipment(Net PPE) was $1,882.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $74.7 Mil.
Selling, General & Admin. Expense(SGA) was $19.2 Mil.
Total Current Liabilities was $64.6 Mil.
Long-Term Debt was $737.3 Mil.
Net Income was 12.147 + 25.947 + 28.542 + 10.07 = $76.7 Mil.
Non Operating Income was 0 + 0 + 0.598 + 0 = $0.6 Mil.
Cash Flow from Operations was 37.557 + 49.832 + 47.112 + 25.069 = $159.6 Mil.
|Accounts Receivable was $15.6 Mil.
Revenue was 146.18 + 165.009 + 162.145 + 109.29 = $582.6 Mil.
Gross Profit was 47.918 + 58.242 + 59.576 + 25.386 = $191.1 Mil.
Total Current Assets was $124.4 Mil.
Total Assets was $2,087.8 Mil.
Property, Plant and Equipment(Net PPE) was $1,926.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $69.7 Mil.
Selling, General & Admin. Expense(SGA) was $18.0 Mil.
Total Current Liabilities was $62.7 Mil.
Long-Term Debt was $769.7 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)|
|=||(19.966 / 619.699)||/||(15.603 / 582.624)|
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)|
|=||(191.122 / 582.624)||/||(204.301 / 619.699)|
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 - (116.67 + 1882.869) / 2035.374)||/||(1 - (124.408 + 1926.944) / 2087.766)|
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))|
|=||(69.743 / (69.743 + 1926.944))||/||(74.661 / (74.661 + 1882.869))|
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)|
|=||(19.167 / 619.699)||/||(18.046 / 582.624)|
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)|
|=||((737.31 + 64.581) / 2035.374)||/||((769.748 + 62.683) / 2087.766)|
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|
|=||(76.706 - 0.598||-||159.57)||/||2035.374|
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 Lodging Trust has a M-score of -2.43 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 Lodging Trust Annual Data
Chesapeake Lodging Trust Quarterly Data