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Cummins Inc (NYSE:CMI)
Beneish M-Score
-2.56 (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 -2.56 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: -2.56

-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 * 0.9947+0.528 * 0.9932+0.404 * 1.024+0.892 * 1.0382+0.115 * 0.9222
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0019+4.679 * -0.0241-0.327 * 0.9799
=-2.56

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

This Year (Sep15) TTM:Last Year (Sep14) TTM:
Accounts Receivable was $3,159 Mil.
Revenue was 4620 + 5015 + 4709 + 5090 = $19,434 Mil.
Gross Profit was 1208 + 1332 + 1195 + 1273 = $5,008 Mil.
Total Current Assets was $8,862 Mil.
Total Assets was $15,797 Mil.
Property, Plant and Equipment(Net PPE) was $3,717 Mil.
Depreciation, Depletion and Amortization(DDA) was $508 Mil.
Selling, General & Admin. Expense(SGA) was $2,149 Mil.
Total Current Liabilities was $3,968 Mil.
Long-Term Debt was $1,595 Mil.
Net Income was 380 + 471 + 387 + 444 = $1,682 Mil.
Non Operating Income was 11 + -8 + 9 + 42 = $54 Mil.
Cash Flow from Operations was 562 + 396 + 173 + 878 = $2,009 Mil.
Accounts Receivable was $3,059 Mil.
Revenue was 4890 + 4835 + 4406 + 4588 = $18,719 Mil.
Gross Profit was 1284 + 1227 + 1116 + 1164 = $4,791 Mil.
Total Current Assets was $9,068 Mil.
Total Assets was $15,644 Mil.
Property, Plant and Equipment(Net PPE) was $3,464 Mil.
Depreciation, Depletion and Amortization(DDA) was $432 Mil.
Selling, General & Admin. Expense(SGA) was $2,066 Mil.
Total Current Liabilities was $4,038 Mil.
Long-Term Debt was $1,584 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)
=(3159 / 19434) / (3059 / 18719)
=0.16255017 / 0.16341685
=0.9947

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)
=(1332 / 18719) / (1208 / 19434)
=0.25594316 / 0.2576927
=0.9932

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 - (8862 + 3717) / 15797) / (1 - (9068 + 3464) / 15644)
=0.20370957 / 0.19892611
=1.024

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
=19434 / 18719
=1.0382

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))
=(432 / (432 + 3464)) / (508 / (508 + 3717))
=0.11088296 / 0.12023669
=0.9222

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)
=(2149 / 19434) / (2066 / 18719)
=0.1105794 / 0.11036914
=1.0019

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)
=((1595 + 3968) / 15797) / ((1584 + 4038) / 15644)
=0.35215547 / 0.359371
=0.9799

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
=(1682 - 54 - 2009) / 15797
=-0.0241

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 -2.56 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 1.08390.98460.70621.48121.05870.82531.02020.95621.12270.9628
GMI 0.9651.16590.95561.02070.83850.9420.97771.02661.00170.9769
AQI 0.91641.12651.08950.94760.91130.98491.07940.94050.9661.1822
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 0.81880.97670.96260.90751.09610.96920.82621.121.03920.9995
TATA -0.0169-0.0127-0.019-0.07870-0.01930.0071-0.0433-0.046-0.0442
M-score -2.34-2.25-2.73-2.63-2.36-2.41-2.39-2.77-2.50-2.68

Cummins Inc Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
DSRI 1.14160.95621.23691.1981.13471.12271.00080.98570.99470.9628
GMI 1.03831.02660.99550.9790.98270.99381.00140.98870.99320.9848
AQI 0.90380.94050.94380.94210.99640.9660.96191.01761.0241.1822
SGI 0.94670.99811.05961.07341.10081.1111.09781.08891.03820.9942
DEPI 0.98391.02441.0481.0551.0871.03960.97750.95180.92220.9104
SGAI 1.04971.01250.99881.0130.98680.9990.98830.97221.00190.9874
LVGI 1.11451.121.12331.08541.0061.03921.02271.01090.97990.9995
TATA -0.0875-0.0433-0.01650.0052-0.0012-0.046-0.0372-0.0297-0.0241-0.0442
M-score -2.87-2.77-2.35-2.27-2.27-2.51-2.59-2.56-2.56-2.67
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