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Cummins Inc (NYSE:CMI)
Beneish M-Score
-2.39 (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 -2.39 suggests that the company is not a manipulator.

CMI' s 10-Year Beneish M-Score Range
Min: -3.31   Max: -2.04
Current: -2.39

-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 -2.48.


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 * 1.198+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
=-2.39

* 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

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)
=(3188 / 18095) / (2479 / 16857)
=0.17618127 / 0.14706057
=1.198

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)
=(1116 / 16857) / (1227 / 18095)
=0.24974788 / 0.25509809
=0.979

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 - (9080 + 3329) / 15500) / (1 - (7404 + 2882) / 13048)
=0.19941935 / 0.21167995
=0.9421

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
=18095 / 16857
=1.0734

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))
=0.11919315 / 0.11297629
=1.055

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)
=0.11213042 / 0.11069585
=1.013

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)
=0.35070968 / 0.32311465
=1.0854

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
=(1571 - 62 - 1830) / 15500
=-0.0207

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.


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 0.93171.04371.08390.98460.70621.48120.91330.85291.03331.0588
GMI 0.89590.90330.9651.16590.95561.02070.83850.9420.97771.0266
AQI 0.76490.83350.91641.12651.08950.94760.91130.98491.07940.9405
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 0.99080.93040.81880.97670.96260.90751.09610.96920.82621.12
TATA -0.059-0.0479-0.0356-0.0404-0.019-0.07870-0.01930.0071-0.0433
M-score -2.65-2.61-2.43-2.38-2.73-2.63-2.50-2.38-2.38-2.68

Cummins Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.81710.80620.90831.03331.04751.16531.14161.05881.23691.198
GMI 0.9320.9460.96070.97771.01811.04851.03831.02660.99550.979
AQI 0.98431.12831.16811.07941.09031.03080.90380.94050.94380.9421
SGI 1.27741.15151.04040.96040.89950.91260.94670.99811.05961.0734
DEPI 1.10381.071.09641.06291.02191.0240.98391.02441.0481.055
SGAI 0.97691.02481.04291.07691.08061.05021.04971.01250.99881.013
LVGI 0.91590.88920.82460.82620.88640.93111.11451.121.12331.0854
TATA -0.00420.01450.02450.0071-0.0397-0.054-0.0483-0.0433-0.0277-0.0207
M-score -2.42-2.39-2.31-2.38-2.64-2.60-2.69-2.68-2.40-2.39
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