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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 -18.00. 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 * 0.8343||+||0.528 * 1.8772||+||0.404 * 1.4397||+||0.892 * 0.7993||+||0.115 * 0.1853|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0157||+||4.679 * -3.1321||-||0.327 * 4.2967|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $87 Mil.|
Revenue was 446 + 1284.7 + 1298.2 + 1100.8 = $4,130 Mil.
Gross Profit was 80.8 + 168.7 + 127.5 + 92 = $469 Mil.
Total Current Assets was $1,524 Mil.
Total Assets was $2,703 Mil.
Property, Plant and Equipment(Net PPE) was $1,047 Mil.
Depreciation, Depletion and Amortization(DDA) was $396 Mil.
Selling, General & Admin. Expense(SGA) was $179 Mil.
Total Current Liabilities was $847 Mil.
Long-Term Debt was $2,881 Mil.
Net Income was -759.8 + -1285.2 + -5879.6 + 10.9 = $-7,914 Mil.
Non Operating Income was 312.9 + 16.3 + 7.1 + 2.2 = $339 Mil.
Cash Flow from Operations was -228.2 + 254.9 + 227.9 + -41.9 = $213 Mil.
|Accounts Receivable was $131 Mil.
Revenue was 615.5 + 1515.8 + 1546.6 + 1488.5 = $5,166 Mil.
Gross Profit was 190 + 294.5 + 348.7 + 268.2 = $1,101 Mil.
Total Current Assets was $1,672 Mil.
Total Assets was $13,203 Mil.
Property, Plant and Equipment(Net PPE) was $11,086 Mil.
Depreciation, Depletion and Amortization(DDA) was $594 Mil.
Selling, General & Admin. Expense(SGA) was $221 Mil.
Total Current Liabilities was $1,043 Mil.
Long-Term Debt was $3,195 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)|
|=||(87.1 / 4129.7)||/||(130.6 / 5166.4)|
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)|
|=||(168.7 / 5166.4)||/||(80.8 / 4129.7)|
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 - (1524.4 + 1047.2) / 2702.6)||/||(1 - (1672.3 + 11086) / 13202.8)|
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))|
|=||(593.8 / (593.8 + 11086))||/||(395.9 / (395.9 + 1047.2))|
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)|
|=||(179.1 / 4129.7)||/||(220.6 / 5166.4)|
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)|
|=||((2880.9 + 846.5) / 2702.6)||/||((3194.8 + 1043.1) / 13202.8)|
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|
|=||(-7913.7 - 338.5||-||212.7)||/||2702.6|
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 -18.00 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