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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.
Cummins Inc has a M-score of -2.39 suggests that the company is not a manipulator.
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 -2.48.
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 * 1.198||+||0.528 * 0.979||+||0.404 * 0.9421||+||0.892 * 1.0734||+||0.115 * 1.055|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.013||+||4.679 * -0.0207||-||0.327 * 1.0854|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $3,188 Mil.|
Revenue was 4835 + 4406 + 4588 + 4266 = $18,095 Mil.
Gross Profit was 1227 + 1116 + 1164 + 1109 = $4,616 Mil.
Total Current Assets was $9,080 Mil.
Total Assets was $15,500 Mil.
Property, Plant and Equipment(Net PPE) was $3,329 Mil.
Depreciation, Depletion and Amortization(DDA) was $424 Mil.
Selling, General & Admin. Expense(SGA) was $2,029 Mil.
Total Current Liabilities was $3,809 Mil.
Long-Term Debt was $1,627 Mil.
Net Income was 446 + 338 + 432 + 355 = $1,571 Mil.
Non Operating Income was 39 + 10 + 7 + 6 = $62 Mil.
Cash Flow from Operations was 438 + 263 + 756 + 373 = $1,830 Mil.
|Accounts Receivable was $2,479 Mil.
Revenue was 4525 + 3922 + 4292 + 4118 = $16,857 Mil.
Gross Profit was 1153 + 957 + 1058 + 1042 = $4,210 Mil.
Total Current Assets was $7,404 Mil.
Total Assets was $13,048 Mil.
Property, Plant and Equipment(Net PPE) was $2,882 Mil.
Depreciation, Depletion and Amortization(DDA) was $390 Mil.
Selling, General & Admin. Expense(SGA) was $1,866 Mil.
Total Current Liabilities was $3,462 Mil.
Long-Term Debt was $754 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)|
|=||(3188 / 18095)||/||(2479 / 16857)|
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)|
|=||(1116 / 16857)||/||(1227 / 18095)|
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 - (9080 + 3329) / 15500)||/||(1 - (7404 + 2882) / 13048)|
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))|
|=||(390 / (390 + 2882))||/||(424 / (424 + 3329))|
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)|
|=||(2029 / 18095)||/||(1866 / 16857)|
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)|
|=||((1627 + 3809) / 15500)||/||((754 + 3462) / 13048)|
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|
|=||(1571 - 62||-||1830)||/||15500|
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 -2.39 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
Cummins Inc Annual Data
Cummins Inc Quarterly Data