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Cummins Inc (NYSE:CMI)
Beneish M-Score
-2.68 (As of Today)

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.

Cummins Inc has a M-score of -2.68 suggests that the company is not a manipulator.

CMI' s 10-Year Beneish M-Score Range
Min: -3.06   Max: -2.34
Current: -2.68

-3.06
-2.34

During the past 13 years, the highest Beneish M-Score of Cummins Inc was -2.34. The lowest was -3.06. And the median was -2.50.


Definition

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 Cummins 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 * 1.0588+0.528 * 1.0266+0.404 * 0.9405+0.892 * 0.9981+0.115 * 1.0244
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0125+4.679 * -0.0433-0.327 * 1.12
=-2.68

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $2,362 Mil.
Revenue was 4588 + 4266 + 4525 + 3922 = $17,301 Mil.
Gross Profit was 1164 + 1109 + 1153 + 957 = $4,383 Mil.
Total Current Assets was $8,639 Mil.
Total Assets was $14,728 Mil.
Property, Plant and Equipment(Net PPE) was $3,156 Mil.
Depreciation, Depletion and Amortization(DDA) was $407 Mil.
Selling, General & Admin. Expense(SGA) was $1,920 Mil.
Total Current Liabilities was $3,368 Mil.
Long-Term Debt was $1,672 Mil.
Net Income was 432 + 355 + 414 + 282 = $1,483 Mil.
Non Operating Income was 7 + 6 + 1 + 18 = $32 Mil.
Cash Flow from Operations was 756 + 373 + 532 + 428 = $2,089 Mil.
Accounts Receivable was $2,235 Mil.
Revenue was 4292 + 4118 + 4452 + 4472 = $17,334 Mil.
Gross Profit was 1058 + 1042 + 1210 + 1198 = $4,508 Mil.
Total Current Assets was $7,167 Mil.
Total Assets was $12,548 Mil.
Property, Plant and Equipment(Net PPE) was $2,724 Mil.
Depreciation, Depletion and Amortization(DDA) was $361 Mil.
Selling, General & Admin. Expense(SGA) was $1,900 Mil.
Total Current Liabilities was $3,136 Mil.
Long-Term Debt was $698 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(2362 / 17301) / (2235 / 17334)
=0.1365239 / 0.12893735
=1.0588

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1109 / 17334) / (1164 / 17301)
=0.26006692 / 0.25333796
=1.0266

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (8639 + 3156) / 14728) / (1 - (7167 + 2724) / 12548)
=0.19914449 / 0.21174689
=0.9405

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=17301 / 17334
=0.9981

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))
=(361 / (361 + 2724)) / (407 / (407 + 3156))
=0.11701783 / 0.11422958
=1.0244

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)
=(1920 / 17301) / (1900 / 17334)
=0.11097624 / 0.10961117
=1.0125

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)
=((1672 + 3368) / 14728) / ((698 + 3136) / 12548)
=0.34220532 / 0.3055467
=1.12

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(1483 - 32 - 2089) / 14728
=-0.0433

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.

Cummins Inc has a M-score of -2.68 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Cummins Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.93171.04371.08390.98460.81141.49340.9140.82530.92121.0588
GMI 0.89590.90330.9651.16590.95561.02070.83850.9420.97771.0266
AQI 0.76690.83130.91641.12651.08950.94760.91130.98491.07940.9405
SGI 1.34021.17541.14561.14841.09920.7531.22461.36460.96040.9981
DEPI 0.99440.8751.00341.05621.02860.98871.08741.08971.06291.0244
SGAI 0.91250.95970.97810.87961.01791.13470.980.90531.07691.0125
LVGI 0.98860.93250.81880.97670.96260.90751.09610.96920.82621.12
TATA -0.0591-0.0479-0.0356-0.0404-0.019-0.07870-0.01930.0071-0.0433
M-score -2.65-2.61-2.43-2.38-2.63-2.62-2.50-2.41-2.48-2.68

Cummins Inc Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.86270.82530.81760.81850.90240.92121.03391.1481.14331.0588
GMI 0.94380.9420.9320.9460.96070.97771.01811.04851.03831.0266
AQI 0.9320.98490.98431.12831.16811.07941.09031.03080.90380.9405
SGI 1.38271.36461.27741.15151.04040.96040.89950.91260.94670.9981
DEPI 1.13391.08971.10381.071.09641.06291.02191.0240.98391.0244
SGAI 0.90350.90530.97691.02481.04291.07691.08061.05021.04971.0125
LVGI 1.0090.96920.91590.88920.82460.82620.88640.93111.11451.12
TATA -0.0078-0.0193-0.00420.01450.02450.0071-0.0397-0.054-0.0483-0.0433
M-score -2.33-2.41-2.42-2.38-2.31-2.48-2.65-2.62-2.69-2.68
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