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Cummins Inc (NYSE:CMI)
Beneish M-Score
-2.51 (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 -2.51 suggests that the company is not a manipulator.

CMI' s 10-Year Beneish M-Score Range
Min: -3.06   Max: -2.34
Current: -2.51

-3.06
-2.34

During the past 13 years, the highest Beneish M-Score of Cummins Inc was -2.34. The lowest was -3.06. 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 * 1.1227+0.528 * 0.9938+0.404 * 0.966+0.892 * 1.111+0.115 * 1.0396
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.999+4.679 * -0.046-0.327 * 1.0392
=-2.51

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $2,946 Mil.
Revenue was 5090 + 4890 + 4835 + 4406 = $19,221 Mil.
Gross Profit was 1273 + 1284 + 1227 + 1116 = $4,900 Mil.
Total Current Assets was $9,055 Mil.
Total Assets was $15,776 Mil.
Property, Plant and Equipment(Net PPE) was $3,686 Mil.
Depreciation, Depletion and Amortization(DDA) was $455 Mil.
Selling, General & Admin. Expense(SGA) was $2,131 Mil.
Total Current Liabilities was $4,021 Mil.
Long-Term Debt was $1,589 Mil.
Net Income was 444 + 423 + 446 + 338 = $1,651 Mil.
Non Operating Income was 42 + 19 + 39 + 10 = $110 Mil.
Cash Flow from Operations was 878 + 687 + 438 + 263 = $2,266 Mil.
Accounts Receivable was $2,362 Mil.
Revenue was 4588 + 4266 + 4525 + 3922 = $17,301 Mil.
Gross Profit was 1164 + 1109 + 1153 + 957 = $4,383 Mil.
Total Current Assets was $8,639 Mil.
Total Assets was $14,728 Mil.
Property, Plant and Equipment(Net PPE) was $3,156 Mil.
Depreciation, Depletion and Amortization(DDA) was $407 Mil.
Selling, General & Admin. Expense(SGA) was $1,920 Mil.
Total Current Liabilities was $3,368 Mil.
Long-Term Debt was $1,672 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)
=(2946 / 19221) / (2362 / 17301)
=0.15326986 / 0.1365239
=1.1227

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)
=(1284 / 17301) / (1273 / 19221)
=0.25333796 / 0.2549295
=0.9938

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 - (9055 + 3686) / 15776) / (1 - (8639 + 3156) / 14728)
=0.19238083 / 0.19914449
=0.966

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
=19221 / 17301
=1.111

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))
=(407 / (407 + 3156)) / (455 / (455 + 3686))
=0.11422958 / 0.10987684
=1.0396

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)
=(2131 / 19221) / (1920 / 17301)
=0.11086832 / 0.11097624
=0.999

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)
=((1589 + 4021) / 15776) / ((1672 + 3368) / 14728)
=0.35560345 / 0.34220532
=1.0392

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
=(1651 - 110 - 2266) / 15776
=-0.046

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 -2.51 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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.04371.08390.98460.70621.48121.05870.82531.02021.07231.001
GMI 0.90330.9651.16590.95561.02070.83850.9420.97771.02661.0017
AQI 0.83130.91641.12651.08950.94760.91130.98491.07940.94050.966
SGI 1.17541.14561.14841.09920.7531.22461.36460.96040.99811.111
DEPI 0.8751.00341.05621.02860.98871.08741.08971.06291.02441.0396
SGAI 0.95970.97810.87961.01791.13470.980.90531.07691.01250.9822
LVGI 0.93250.81880.97670.96260.90751.09610.96920.82621.121.0392
TATA -0.0479-0.0356-0.0404-0.019-0.07870-0.01930.0071-0.0433-0.046
M-score -2.61-2.43-2.38-2.73-2.63-2.36-2.41-2.39-2.67-2.61

Cummins Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 0.90831.02021.04751.16531.14160.95621.23691.1981.13471.1227
GMI 0.96070.97771.01811.04851.03831.02660.99550.9790.98270.9938
AQI 1.16811.07941.09031.03080.90380.94050.94380.94210.99640.966
SGI 1.04040.96040.89950.91260.94670.99811.05961.07341.10081.111
DEPI 1.09641.06291.02191.0240.98391.02441.0481.0551.0871.0396
SGAI 1.04291.07691.08061.05021.04971.01250.99881.0130.98680.999
LVGI 0.82460.82620.88640.93111.11451.121.12331.08541.0061.0392
TATA 0.02450.0071-0.0397-0.054-0.0483-0.0433-0.0277-0.0207-0.0371-0.046
M-score -2.31-2.39-2.64-2.60-2.69-2.77-2.40-2.39-2.44-2.51
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