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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 6 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 * 0.9122||+||0.528 * 0.9646||+||0.404 * 1.0082||+||0.892 * 1.1086||+||0.115 * 0.8592|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.001||+||4.679 * -0.0418||-||0.327 * 0.9857|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $26.8 Mil.|
Revenue was 164.529 + 169.431 + 140.611 + 146.18 = $620.8 Mil.
Gross Profit was 57.138 + 62.752 + 40.206 + 47.918 = $208.0 Mil.
Total Current Assets was $142.2 Mil.
Total Assets was $2,065.4 Mil.
Property, Plant and Equipment(Net PPE) was $1,887.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $74.9 Mil.
Selling, General & Admin. Expense(SGA) was $19.0 Mil.
Total Current Liabilities was $68.5 Mil.
Long-Term Debt was $750.0 Mil.
Net Income was 25.947 + 28.542 + 10.07 + 14.731 = $79.3 Mil.
Non Operating Income was 0 + 0.598 + 0 + 0 = $0.6 Mil.
Cash Flow from Operations was 49.832 + 47.112 + 25.069 + 43.075 = $165.1 Mil.
|Accounts Receivable was $26.5 Mil.
Revenue was 165.009 + 162.145 + 109.29 + 123.501 = $559.9 Mil.
Gross Profit was 58.242 + 59.576 + 25.386 + 37.785 = $181.0 Mil.
Total Current Assets was $139.9 Mil.
Total Assets was $2,115.7 Mil.
Property, Plant and Equipment(Net PPE) was $1,939.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $65.8 Mil.
Selling, General & Admin. Expense(SGA) was $17.1 Mil.
Total Current Liabilities was $66.6 Mil.
Long-Term Debt was $783.9 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)|
|=||(26.812 / 620.751)||/||(26.514 / 559.945)|
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)|
|=||(180.989 / 559.945)||/||(208.014 / 620.751)|
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 - (142.166 + 1887.28) / 2065.426)||/||(1 - (139.912 + 1939.257) / 2115.727)|
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))|
|=||(65.761 / (65.761 + 1939.257))||/||(74.898 / (74.898 + 1887.28))|
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)|
|=||(19.026 / 620.751)||/||(17.146 / 559.945)|
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)|
|=||((749.979 + 68.498) / 2065.426)||/||((783.915 + 66.636) / 2115.727)|
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|
|=||(79.29 - 0.598||-||165.088)||/||2065.426|
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 -2.69 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