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Cummins Inc (NYSE:CMI)
Beneish M-Score
-2.57 (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 -2.57 suggests that the company is not a manipulator.

CMI' s 10-Year Beneish M-Score Range
Min: -3.31   Max: -2.04
Current: -2.57

-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 * 0.9857+0.528 * 0.9685+0.404 * 1.0176+0.892 * 1.0889+0.115 * 0.9518
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0163+4.679 * -0.0297-0.327 * 1.0109
=-2.57

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

This Year (Jun15) TTM:Last Year (Jun14) TTM:
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 $2,148 Mil.
Total Current Liabilities was $4,053 Mil.
Long-Term Debt was $1,576 Mil.
Net Income was 471 + 387 + 444 + 423 = $1,725 Mil.
Non Operating Income was -8 + 9 + 42 + 19 = $62 Mil.
Cash Flow from Operations was 396 + 173 + 878 + 687 = $2,134 Mil.
Accounts Receivable was $3,188 Mil.
Revenue was 4835 + 4406 + 4588 + 4266 = $18,095 Mil.
Gross Profit was 1205 + 1099 + 1137 + 1081 = $4,522 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 $1,941 Mil.
Total Current Liabilities was $3,809 Mil.
Long-Term Debt was $1,627 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)
=(3422 / 19704) / (3188 / 18095)
=0.17367032 / 0.17618127
=0.9857

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)
=(1195 / 18095) / (1332 / 19704)
=0.24990329 / 0.25801868
=0.9685

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 - (9003 + 3653) / 15878) / (1 - (9080 + 3329) / 15500)
=0.20292228 / 0.19941935
=1.0176

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
=19704 / 18095
=1.0889

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))
=(424 / (424 + 3329)) / (492 / (492 + 3653))
=0.11297629 / 0.11869723
=0.9518

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)
=(2148 / 19704) / (1941 / 18095)
=0.1090134 / 0.1072672
=1.0163

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)
=((1576 + 4053) / 15878) / ((1627 + 3809) / 15500)
=0.35451568 / 0.35070968
=1.0109

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
=(1725 - 62 - 2134) / 15878
=-0.0297

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 -2.57 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

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
DSRI 1.04751.16531.14161.18751.23691.1981.13471.0011.00080.9857
GMI 1.01811.04851.04511.03961.01150.99940.98990.98920.98990.9685
AQI 1.09031.03080.90380.94050.94380.94210.99640.9660.96191.0176
SGI 0.89950.91260.94670.99811.05961.07341.10081.1111.09781.0889
DEPI 1.02191.0240.98391.02441.0481.0551.0871.03960.97750.9518
SGAI 1.08061.05021.03870.98660.96540.9690.96441.00641.01191.0163
LVGI 0.88640.93111.11451.121.12331.08541.0061.03921.02271.0109
TATA -0.0397-0.054-0.0483-0.0433-0.0277-0.0207-0.0371-0.046-0.0372-0.0297
M-score -2.64-2.60-2.68-2.55-2.38-2.37-2.43-2.62-2.60-2.57
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