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Cummins Inc (NYSE:CMI)
Beneish M-Score
-2.85 (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 -2.85 suggests that the company is not a manipulator.

CMI' s Beneish M-Score Range Over the Past 10 Years
Min: -3.31   Max: -1.91
Current: -2.85

-3.31
-1.91

During the past 13 years, the highest Beneish M-Score of Cummins Inc was -1.91. The lowest was -3.31. And the median was -2.52.


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 * 0.9561+0.528 * 1.0052+0.404 * 1.2097+0.892 * 0.9239+0.115 * 0.9656
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0325+4.679 * -0.0659-0.327 * 1.0825
=-2.85

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

This Year (Jun16) TTM:Last Year (Jun15) TTM:
Accounts Receivable was $3,023 Mil.
Revenue was 4528 + 4291 + 4766 + 4620 = $18,205 Mil.
Gross Profit was 1197 + 1056 + 1212 + 1208 = $4,673 Mil.
Total Current Assets was $7,630 Mil.
Total Assets was $15,020 Mil.
Property, Plant and Equipment(Net PPE) was $3,703 Mil.
Depreciation, Depletion and Amortization(DDA) was $519 Mil.
Selling, General & Admin. Expense(SGA) was $2,052 Mil.
Total Current Liabilities was $4,150 Mil.
Long-Term Debt was $1,614 Mil.
Net Income was 406 + 321 + 161 + 380 = $1,268 Mil.
Non Operating Income was 18 + 8 + -3 + 11 = $34 Mil.
Cash Flow from Operations was 471 + 263 + 928 + 562 = $2,224 Mil.
Accounts Receivable was $3,422 Mil.
Revenue was 5015 + 4709 + 5090 + 4890 = $19,704 Mil.
Gross Profit was 1332 + 1195 + 1273 + 1284 = $5,084 Mil.
Total Current Assets was $9,003 Mil.
Total Assets was $15,878 Mil.
Property, Plant and Equipment(Net PPE) was $3,653 Mil.
Depreciation, Depletion and Amortization(DDA) was $492 Mil.
Selling, General & Admin. Expense(SGA) was $2,151 Mil.
Total Current Liabilities was $4,053 Mil.
Long-Term Debt was $1,576 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)
=(3023 / 18205) / (3422 / 19704)
=0.16605328 / 0.17367032
=0.9561

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)
=(5084 / 19704) / (4673 / 18205)
=0.25801868 / 0.25668772
=1.0052

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 - (7630 + 3703) / 15020) / (1 - (9003 + 3653) / 15878)
=0.2454727 / 0.20292228
=1.2097

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
=18205 / 19704
=0.9239

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))
=(492 / (492 + 3653)) / (519 / (519 + 3703))
=0.11869723 / 0.12292752
=0.9656

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)
=(2052 / 18205) / (2151 / 19704)
=0.11271629 / 0.10916565
=1.0325

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 + 4150) / 15020) / ((1576 + 4053) / 15878)
=0.38375499 / 0.35451568
=1.0825

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
=(1268 - 34 - 2224) / 15020
=-0.0659

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 -2.85 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 0.9651.16590.95561.02070.83850.9420.99811.02980.97820.9769
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 0.97810.87961.01791.13470.980.90531.02481.00691.03781.0044
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 -2.34-2.25-2.73-2.41-2.50-2.41-2.46-2.56-2.64-2.67

Cummins Inc Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
DSRI 1.1151.08191.02581.0011.00080.98570.99470.96280.8820.9561
GMI 0.98970.97750.96850.98920.98990.96850.97950.97690.98711.0052
AQI 0.94380.94210.99640.96290.96191.01761.0241.1861.2491.2097
SGI 1.05961.07341.10081.1111.09781.08891.03820.99420.95740.9239
DEPI 1.0481.0551.0871.03960.97750.95180.92220.91040.9550.9656
SGAI 1.01541.01931.0141.00791.01341.01771.03751.00441.01411.0325
LVGI 1.12331.08541.0061.03771.02271.01090.97991.00091.03731.0825
TATA -0.0277-0.0207-0.0371-0.046-0.0372-0.0297-0.0241-0.0442-0.0556-0.0659
M-score -2.52-2.50-2.55-2.63-2.60-2.57-2.57-2.67-2.81-2.85
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