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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 1.08. The lowest was -12.87. And the median was -2.73.
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 * 3.0562||+||0.528 * 0.6364||+||0.404 * 1.3597||+||0.892 * 1.0475||+||0.115 * 1.0705|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0214||+||4.679 * -0.1536||-||0.327 * 0.8681|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $129 Mil.|
Revenue was 754 + 553.3 + 496.2 + 305.5 = $2,109 Mil.
Gross Profit was 181.5 + 85.4 + 91.5 + 30.9 = $389 Mil.
Total Current Assets was $825 Mil.
Total Assets was $1,924 Mil.
Property, Plant and Equipment(Net PPE) was $984 Mil.
Depreciation, Depletion and Amortization(DDA) was $115 Mil.
Selling, General & Admin. Expense(SGA) was $118 Mil.
Total Current Liabilities was $391 Mil.
Long-Term Debt was $2,175 Mil.
Net Income was 79.1 + -25.8 + 12.8 + 108 = $174 Mil.
Non Operating Income was 2.2 + -18.2 + 3.8 + 178.9 = $167 Mil.
Cash Flow from Operations was 230.9 + 91.4 + 107.2 + -126.5 = $303 Mil.
|Accounts Receivable was $40 Mil.
Revenue was 476 + 593.2 + 498.1 + 446 = $2,013 Mil.
Gross Profit was 43.3 + 55.1 + 57.3 + 80.8 = $237 Mil.
Total Current Assets was $983 Mil.
Total Assets was $2,136 Mil.
Property, Plant and Equipment(Net PPE) was $1,059 Mil.
Depreciation, Depletion and Amortization(DDA) was $134 Mil.
Selling, General & Admin. Expense(SGA) was $110 Mil.
Total Current Liabilities was $582 Mil.
Long-Term Debt was $2,699 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)|
|=||(128.7 / 2109)||/||(40.2 / 2013.3)|
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)|
|=||(236.5 / 2013.3)||/||(389.3 / 2109)|
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 - (824.6 + 984.4) / 1923.9)||/||(1 - (982.7 + 1059) / 2135.5)|
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))|
|=||(134 / (134 + 1059))||/||(115.4 / (115.4 + 984.4))|
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)|
|=||(117.8 / 2109)||/||(110.1 / 2013.3)|
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)|
|=||((2175.1 + 391.1) / 1923.9)||/||((2699.4 + 581.7) / 2135.5)|
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|
|=||(174.1 - 166.7||-||303)||/||1923.9|
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 -1.26 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