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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.
Cliffs Natural Resources Inc. has a M-score of -3.00 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Cliffs Natural Resources Inc. was 0.81. The lowest was -7.79. And the median was -2.58.
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 * 0.8468||+||0.528 * 0.9883||+||0.404 * 0.5889||+||0.892 * 0.9691||+||0.115 * 0.8873|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8412||+||4.679 * -0.0556||-||0.327 * 0.7955|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $270 Mil.|
Revenue was 1515.8 + 1546.6 + 1488.5 + 1140.5 = $5,691 Mil.
Gross Profit was 294.5 + 348.7 + 268.2 + 237.9 = $1,149 Mil.
Total Current Assets was $1,560 Mil.
Total Assets was $13,122 Mil.
Property, Plant and Equipment(Net PPE) was $11,153 Mil.
Depreciation, Depletion and Amortization(DDA) was $593 Mil.
Selling, General & Admin. Expense(SGA) was $232 Mil.
Total Current Liabilities was $1,086 Mil.
Long-Term Debt was $3,023 Mil.
Net Income was 43.3 + 117.2 + 146 + 107 = $414 Mil.
Non Operating Income was 0.3 + -1.2 + -2.8 + 1.1 = $-3 Mil.
Cash Flow from Operations was 460 + 297 + 414.3 + -25.4 = $1,146 Mil.
|Accounts Receivable was $329 Mil.
Revenue was 1535.9 + 1544.9 + 1579.4 + 1212.4 = $5,873 Mil.
Gross Profit was 238.5 + 198.3 + 443.4 + 291.8 = $1,172 Mil.
Total Current Assets was $1,650 Mil.
Total Assets was $13,575 Mil.
Property, Plant and Equipment(Net PPE) was $11,207 Mil.
Depreciation, Depletion and Amortization(DDA) was $526 Mil.
Selling, General & Admin. Expense(SGA) was $284 Mil.
Total Current Liabilities was $1,382 Mil.
Long-Term Debt was $3,961 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)|
|=||(270 / 5691.4)||/||(329 / 5872.6)|
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)|
|=||(348.7 / 5872.6)||/||(294.5 / 5691.4)|
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 - (1560 + 11153.4) / 13121.9)||/||(1 - (1650 + 11207.3) / 13574.9)|
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))|
|=||(525.8 / (525.8 + 11207.3))||/||(593.3 / (593.3 + 11153.4))|
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)|
|=||(231.6 / 5691.4)||/||(284.1 / 5872.6)|
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)|
|=||((3022.6 + 1085.5) / 13121.9)||/||((3960.7 + 1381.5) / 13574.9)|
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|
|=||(413.5 - -2.6||-||1145.9)||/||13121.9|
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 -3.00 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