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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 -18.31. And the median was -2.55.
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 * 1.9737||+||0.528 * 1.8653||+||0.404 * 0.7396||+||0.892 * 0.6333||+||0.115 * 1.7569|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1961||+||4.679 * -0.2474||-||0.327 * 1.1081|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $62 Mil.|
Revenue was 496.2 + 305.5 + 476 + 593.2 = $1,871 Mil.
Gross Profit was 91.5 + 30.9 + 43.3 + 55.1 = $221 Mil.
Total Current Assets was $779 Mil.
Total Assets was $1,851 Mil.
Property, Plant and Equipment(Net PPE) was $993 Mil.
Depreciation, Depletion and Amortization(DDA) was $133 Mil.
Selling, General & Admin. Expense(SGA) was $101 Mil.
Total Current Liabilities was $376 Mil.
Long-Term Debt was $2,490 Mil.
Net Income was 12.8 + 108 + -60.3 + 10.6 = $71 Mil.
Non Operating Income was 3.8 + 178.9 + 0.4 + 79.1 = $262 Mil.
Cash Flow from Operations was 107.2 + -126.5 + 97.4 + 188.7 = $267 Mil.
|Accounts Receivable was $49 Mil.
Revenue was 498.1 + 446 + 1030.3 + 979.7 = $2,954 Mil.
Gross Profit was 57.3 + 80.8 + 256 + 256.2 = $650 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 $133 Mil.
Total Current Liabilities was $758 Mil.
Long-Term Debt was $2,887 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)|
|=||(61.5 / 1870.9)||/||(49.2 / 2954.1)|
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)|
|=||(650.3 / 2954.1)||/||(220.8 / 1870.9)|
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 - (779.2 + 993.1) / 1851)||/||(1 - (1382.2 + 1077.2) / 2609.4)|
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))|
|=||(281.1 / (281.1 + 1077.2))||/||(132.6 / (132.6 + 993.1))|
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)|
|=||(100.9 / 1870.9)||/||(133.2 / 2954.1)|
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)|
|=||((2489.7 + 376.1) / 1851)||/||((2887.4 + 758.4) / 2609.4)|
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|
|=||(71.1 - 262.2||-||266.8)||/||1851|
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 -2.70 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