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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 13 years, the highest Beneish M-Score of Cliffs Natural Resources Inc was 1.46. The lowest was -18.79. And the median was -2.52.
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 Cliffs Natural Resources Inc 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 * 0.3113||+||0.528 * 1.8657||+||0.404 * 1.7362||+||0.892 * 0.797||+||0.115 * 0.2478|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.929||+||4.679 * -3.2319||-||0.327 * 4.2273|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $49 Mil.|
Revenue was 498.1 + 446 + 1284.7 + 1298.2 = $3,527 Mil.
Gross Profit was 57.3 + 80.8 + 168.7 + 127.5 = $434 Mil.
Total Current Assets was $1,382 Mil.
Total Assets was $2,609 Mil.
Property, Plant and Equipment(Net PPE) was $1,077 Mil.
Depreciation, Depletion and Amortization(DDA) was $281 Mil.
Selling, General & Admin. Expense(SGA) was $157 Mil.
Total Current Liabilities was $758 Mil.
Long-Term Debt was $2,887 Mil.
Net Income was 60.2 + -759.8 + -1285.2 + -5879.6 = $-7,864 Mil.
Non Operating Income was -2.1 + 312.9 + 16.3 + 7.1 = $334 Mil.
Cash Flow from Operations was -20 + -228.2 + 254.9 + 227.9 = $235 Mil.
|Accounts Receivable was $198 Mil.
Revenue was 747.7 + 615.5 + 1515.8 + 1546.6 = $4,426 Mil.
Gross Profit was 183.5 + 190 + 294.5 + 348.7 = $1,017 Mil.
Total Current Assets was $1,664 Mil.
Total Assets was $13,102 Mil.
Property, Plant and Equipment(Net PPE) was $11,005 Mil.
Depreciation, Depletion and Amortization(DDA) was $595 Mil.
Selling, General & Admin. Expense(SGA) was $213 Mil.
Total Current Liabilities was $1,038 Mil.
Long-Term Debt was $3,293 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)|
|=||(49.2 / 3527)||/||(198.3 / 4425.6)|
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)|
|=||(80.8 / 4425.6)||/||(57.3 / 3527)|
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 - (1382.2 + 1077.2) / 2609.4)||/||(1 - (1663.8 + 11004.8) / 13102.4)|
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))|
|=||(594.8 / (594.8 + 11004.8))||/||(281.1 / (281.1 + 1077.2))|
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)|
|=||(157.4 / 3527)||/||(212.6 / 4425.6)|
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)|
|=||((2887.4 + 758.4) / 2609.4)||/||((3293 + 1037.5) / 13102.4)|
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|
|=||(-7864.4 - 334.2||-||234.6)||/||2609.4|
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.
Cliffs Natural Resources Inc has a M-score of -18.79 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
Cliffs Natural Resources Inc Annual Data
Cliffs Natural Resources Inc Quarterly Data