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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 -1.88. The lowest was -2.77. And the median was -2.48.
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 * 0.9153||+||0.528 * 1.0285||+||0.404 * 1.0087||+||0.892 * 1||+||0.115 * 0.9629|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0054||+||4.679 * -0.0414||-||0.327 * 0.9867|
|This Year (Mar17) TTM:||Last Year (Mar16) TTM:|
|Accounts Receivable was $19.8 Mil.|
Revenue was 134.874 + 145.128 + 164.529 + 169.431 = $614.0 Mil.
Gross Profit was 36.142 + 44.205 + 57.138 + 62.752 = $200.2 Mil.
Total Current Assets was $116.8 Mil.
Total Assets was $2,033.0 Mil.
Property, Plant and Equipment(Net PPE) was $1,880.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $75.0 Mil.
Selling, General & Admin. Expense(SGA) was $18.8 Mil.
Total Current Liabilities was $62.6 Mil.
Long-Term Debt was $754.5 Mil.
Net Income was 8.019 + 12.147 + 25.947 + 28.542 = $74.7 Mil.
Non Operating Income was 0 + 0 + 0 + 0.598 = $0.6 Mil.
Cash Flow from Operations was 23.695 + 37.557 + 49.832 + 47.112 = $158.2 Mil.
|Accounts Receivable was $21.6 Mil.
Revenue was 140.611 + 146.18 + 165.009 + 162.145 = $613.9 Mil.
Gross Profit was 40.206 + 47.918 + 58.242 + 59.576 = $205.9 Mil.
Total Current Assets was $135.3 Mil.
Total Assets was $2,083.9 Mil.
Property, Plant and Equipment(Net PPE) was $1,912.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $73.3 Mil.
Selling, General & Admin. Expense(SGA) was $18.7 Mil.
Total Current Liabilities was $65.4 Mil.
Long-Term Debt was $783.4 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)|
|=||(19.759 / 613.962)||/||(21.587 / 613.945)|
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)|
|=||(205.942 / 613.945)||/||(200.237 / 613.962)|
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 - (116.82 + 1880.471) / 2032.981)||/||(1 - (135.333 + 1912.31) / 2083.912)|
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))|
|=||(73.3 / (73.3 + 1912.31))||/||(74.964 / (74.964 + 1880.471))|
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)|
|=||(18.836 / 613.962)||/||(18.735 / 613.945)|
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)|
|=||((754.519 + 62.582) / 2032.981)||/||((783.416 + 65.409) / 2083.912)|
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|
|=||(74.655 - 0.598||-||158.196)||/||2032.981|
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 -2.73 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