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Beneish M-Score 23.36 higher than -2.22, which implies that it might have manipulated its financial results.
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 23.36. The lowest was -17.52. And the median was -2.51.
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 * 0.3247||+||0.528 * 61.3743||+||0.404 * 1.248||+||0.892 * 0.9895||+||0.115 * 1.0954|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8029||+||4.679 * -1.1341||-||0.327 * 1.739|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $53 Mil.|
Revenue was 593.2 + 498.1 + 446 + 2280.8 = $3,818 Mil.
Gross Profit was 55.1 + 57.3 + 80.8 + -178.3 = $15 Mil.
Total Current Assets was $1,076 Mil.
Total Assets was $2,272 Mil.
Property, Plant and Equipment(Net PPE) was $1,053 Mil.
Depreciation, Depletion and Amortization(DDA) was $173 Mil.
Selling, General & Admin. Expense(SGA) was $152 Mil.
Total Current Liabilities was $670 Mil.
Long-Term Debt was $2,722 Mil.
Net Income was 10.6 + 60.2 + -759.8 + -1285.2 = $-1,974 Mil.
Non Operating Income was 79.1 + -2.1 + 312.9 + 16.7 = $407 Mil.
Cash Flow from Operations was 188.7 + -20 + -228.2 + 254.9 = $195 Mil.
|Accounts Receivable was $166 Mil.
Revenue was 979.7 + 747.7 + 615.5 + 1515.8 = $3,859 Mil.
Gross Profit was 256.2 + 183.5 + 190 + 294.5 = $924 Mil.
Total Current Assets was $1,361 Mil.
Total Assets was $4,811 Mil.
Property, Plant and Equipment(Net PPE) was $3,208 Mil.
Depreciation, Depletion and Amortization(DDA) was $586 Mil.
Selling, General & Admin. Expense(SGA) was $192 Mil.
Total Current Liabilities was $1,118 Mil.
Long-Term Debt was $3,013 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)|
|=||(53.4 / 3818.1)||/||(166.2 / 3858.7)|
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)|
|=||(57.3 / 3858.7)||/||(55.1 / 3818.1)|
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 - (1075.9 + 1052.6) / 2271.5)||/||(1 - (1360.6 + 3207.9) / 4811.2)|
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))|
|=||(585.7 / (585.7 + 3207.9))||/||(172.7 / (172.7 + 1052.6))|
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)|
|=||(152.3 / 3818.1)||/||(191.7 / 3858.7)|
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)|
|=||((2721.6 + 669.9) / 2271.5)||/||((3012.5 + 1118.3) / 4811.2)|
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|
|=||(-1974.2 - 406.6||-||195.4)||/||2271.5|
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 23.36 signals that the company is likely to 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