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Cummins Inc (NYSE:CMI)
Beneish M-Score
-2.81 (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 -2.81 suggests that the company is not a manipulator.

CMI' s Beneish M-Score Range Over the Past 10 Years
Min: -3.31   Max: -2.04
Current: -2.81

-3.31
-2.04

During the past 13 years, the highest Beneish M-Score of Cummins Inc was -2.04. The lowest was -3.31. 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 * 0.882+0.528 * 0.9871+0.404 * 1.249+0.892 * 0.9574+0.115 * 0.955
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0141+4.679 * -0.0556-0.327 * 1.0373
=-2.81

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

This Year (Mar16) TTM:Last Year (Mar15) TTM:
Accounts Receivable was $2,736 Mil.
Revenue was 4291 + 4766 + 4620 + 5015 = $18,692 Mil.
Gross Profit was 1056 + 1212 + 1208 + 1332 = $4,808 Mil.
Total Current Assets was $7,468 Mil.
Total Assets was $14,827 Mil.
Property, Plant and Equipment(Net PPE) was $3,712 Mil.
Depreciation, Depletion and Amortization(DDA) was $514 Mil.
Selling, General & Admin. Expense(SGA) was $2,065 Mil.
Total Current Liabilities was $3,917 Mil.
Long-Term Debt was $1,614 Mil.
Net Income was 321 + 161 + 380 + 471 = $1,333 Mil.
Non Operating Income was 8 + -3 + 11 + -8 = $8 Mil.
Cash Flow from Operations was 263 + 928 + 562 + 396 = $2,149 Mil.
Accounts Receivable was $3,240 Mil.
Revenue was 4709 + 5090 + 4890 + 4835 = $19,524 Mil.
Gross Profit was 1195 + 1273 + 1284 + 1205 = $4,957 Mil.
Total Current Assets was $9,000 Mil.
Total Assets was $15,736 Mil.
Property, Plant and Equipment(Net PPE) was $3,637 Mil.
Depreciation, Depletion and Amortization(DDA) was $478 Mil.
Selling, General & Admin. Expense(SGA) was $2,127 Mil.
Total Current Liabilities was $4,057 Mil.
Long-Term Debt was $1,602 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)
=(2736 / 18692) / (3240 / 19524)
=0.14637278 / 0.1659496
=0.882

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)
=(4957 / 19524) / (4808 / 18692)
=0.25389264 / 0.25722234
=0.9871

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 - (7468 + 3712) / 14827) / (1 - (9000 + 3637) / 15736)
=0.24597019 / 0.19693696
=1.249

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
=18692 / 19524
=0.9574

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))
=(478 / (478 + 3637)) / (514 / (514 + 3712))
=0.11616039 / 0.12162802
=0.955

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)
=(2065 / 18692) / (2127 / 19524)
=0.11047507 / 0.10894284
=1.0141

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)
=((1614 + 3917) / 14827) / ((1602 + 4057) / 15736)
=0.37303568 / 0.35962125
=1.0373

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
=(1333 - 8 - 2149) / 14827
=-0.0556

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 -2.81 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

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 1.08390.98460.70621.71580.9140.82530.92121.18751.0010.9628
GMI 0.9651.16590.95561.02070.83850.9420.97771.02661.00170.9769
AQI 0.91641.12651.08950.94760.91130.98491.07940.94050.96291.186
SGI 1.14561.14841.09920.7531.22461.36460.96040.99811.1110.9942
DEPI 1.00341.05621.02860.98871.08741.08971.06291.02441.03960.9104
SGAI 0.97810.87961.01791.13470.980.90531.07691.01250.98221.0044
LVGI 0.81880.97670.96260.90751.09610.96920.82621.121.03771.0009
TATA -0.0169-0.0127-0.019-0.07870-0.01930.0071-0.0433-0.046-0.0442
M-score -2.34-2.25-2.73-2.41-2.50-2.41-2.48-2.56-2.61-2.67

Cummins Inc Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
DSRI 1.18751.23691.1981.13471.0011.00080.98570.99470.96280.882
GMI 1.01840.98970.97750.96850.98920.98990.96850.97950.97690.9871
AQI 0.94050.94380.94210.99640.96290.96191.01761.0241.1861.249
SGI 0.99811.05961.07341.10081.1111.09781.08891.03820.99420.9574
DEPI 1.02441.0481.0551.0871.03960.97750.95180.92220.91040.955
SGAI 1.03681.01541.01931.0141.00791.01341.01771.03751.00441.0141
LVGI 1.121.12331.08541.0061.03771.02271.01090.97991.00091.0373
TATA -0.0433-0.0277-0.0207-0.0371-0.046-0.0372-0.0297-0.0241-0.0442-0.0556
M-score -2.57-2.40-2.39-2.45-2.63-2.60-2.57-2.57-2.67-2.81
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