Switch to:
Cummins Inc (NYSE:CMI)
Beneish M-Score
-2.60 (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 -2.60 suggests that the company is not a manipulator.

CMI' s 10-Year Beneish M-Score Range
Min: -3.31   Max: -2.04
Current: -2.6

-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 * 1.0008+0.528 * 0.9856+0.404 * 0.9619+0.892 * 1.0978+0.115 * 0.9775
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0224+4.679 * -0.0372-0.327 * 1.0227
=-2.60

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

This Year (Mar15) TTM:Last Year (Mar14) TTM:
Accounts Receivable was $3,240 Mil.
Revenue was 4709 + 5090 + 4890 + 4835 = $19,524 Mil.
Gross Profit was 1195 + 1273 + 1284 + 1227 = $4,979 Mil.
Total Current Assets was $9,000 Mil.
Total Assets was $15,736 Mil.
Property, Plant and Equipment(Net PPE) was $3,637 Mil.
Depreciation, Depletion and Amortization(DDA) was $478 Mil.
Selling, General & Admin. Expense(SGA) was $2,146 Mil.
Total Current Liabilities was $4,057 Mil.
Long-Term Debt was $1,602 Mil.
Net Income was 387 + 444 + 423 + 446 = $1,700 Mil.
Non Operating Income was 9 + 42 + 19 + 39 = $109 Mil.
Cash Flow from Operations was 173 + 878 + 687 + 438 = $2,176 Mil.
Accounts Receivable was $2,949 Mil.
Revenue was 4406 + 4588 + 4266 + 4525 = $17,785 Mil.
Gross Profit was 1099 + 1137 + 1081 + 1153 = $4,470 Mil.
Total Current Assets was $8,499 Mil.
Total Assets was $14,751 Mil.
Property, Plant and Equipment(Net PPE) was $3,232 Mil.
Depreciation, Depletion and Amortization(DDA) was $414 Mil.
Selling, General & Admin. Expense(SGA) was $1,912 Mil.
Total Current Liabilities was $3,555 Mil.
Long-Term Debt was $1,632 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)
=(3240 / 19524) / (2949 / 17785)
=0.1659496 / 0.16581389
=1.0008

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)
=(1273 / 17785) / (1195 / 19524)
=0.25133539 / 0.25501946
=0.9856

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 - (9000 + 3637) / 15736) / (1 - (8499 + 3232) / 14751)
=0.19693696 / 0.20473188
=0.9619

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
=19524 / 17785
=1.0978

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))
=(414 / (414 + 3232)) / (478 / (478 + 3637))
=0.11354909 / 0.11616039
=0.9775

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)
=(2146 / 19524) / (1912 / 17785)
=0.109916 / 0.10750633
=1.0224

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)
=((1602 + 4057) / 15736) / ((1632 + 3555) / 14751)
=0.35962125 / 0.35163718
=1.0227

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
=(1700 - 109 - 2176) / 15736
=-0.0372

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 -2.60 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 1.04371.08390.98460.70621.71580.9140.82531.02021.07231.001
GMI 0.90330.9651.16590.95561.02070.83850.9420.97771.05130.9782
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 0.95970.97810.87961.01791.13470.980.90531.07690.95811.0378
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 -2.61-2.43-2.38-2.73-2.41-2.50-2.41-2.39-2.64-2.64

Cummins Inc Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
DSRI 0.92121.04751.16531.14161.18751.23691.1981.13471.0011.0008
GMI 0.97771.01811.04851.04511.03961.01150.99450.98530.98470.9856
AQI 1.07941.09031.03080.90380.94050.94380.94210.99640.9660.9619
SGI 0.96040.89950.91260.94670.99811.05961.07341.10081.1111.0978
DEPI 1.06291.02191.0240.98391.02441.0481.0551.0871.03960.9775
SGAI 1.07691.08061.05021.03870.98660.96540.980.9751.0171.0224
LVGI 0.82620.88640.93111.11451.121.12331.08541.0061.03921.0227
TATA 0.0071-0.0397-0.054-0.0483-0.0433-0.0277-0.0207-0.0371-0.046-0.0372
M-score -2.48-2.64-2.60-2.68-2.55-2.38-2.37-2.44-2.63-2.60
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GuruFocus Premium Plus Membership

FEEDBACK