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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.
Crane Company has a M-score of -2.27 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Crane Company was -1.94. The lowest was -3.22. And the median was -2.59.
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 Crane Company 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 * 1.2463||+||0.528 * 0.9899||+||0.404 * 1.1861||+||0.892 * 1.0063||+||0.115 * 1.1544|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9854||+||4.679 * -0.0064||-||0.327 * 1.2638|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $460 Mil.|
Revenue was 681.449 + 637.515 + 648.746 + 627.571 = $2,595 Mil.
Gross Profit was 226.851 + 216.198 + 222.721 + 217.752 = $884 Mil.
Total Current Assets was $1,149 Mil.
Total Assets was $3,560 Mil.
Property, Plant and Equipment(Net PPE) was $305 Mil.
Depreciation, Depletion and Amortization(DDA) was $55 Mil.
Selling, General & Admin. Expense(SGA) was $536 Mil.
Total Current Liabilities was $669 Mil.
Long-Term Debt was $749 Mil.
Net Income was 49.706 + 57.131 + 54.874 + 57.791 = $220 Mil.
Non Operating Income was 2.903 + -0.456 + 0.406 + -0.12 = $3 Mil.
Cash Flow from Operations was 148.433 + 80.454 + 30.948 + -20.403 = $239 Mil.
|Accounts Receivable was $367 Mil.
Revenue was 629.788 + 645.981 + 657.686 + 645.613 = $2,579 Mil.
Gross Profit was 211.704 + 219.833 + 221.591 + 215.988 = $869 Mil.
Total Current Assets was $1,181 Mil.
Total Assets was $2,890 Mil.
Property, Plant and Equipment(Net PPE) was $268 Mil.
Depreciation, Depletion and Amortization(DDA) was $57 Mil.
Selling, General & Admin. Expense(SGA) was $540 Mil.
Total Current Liabilities was $512 Mil.
Long-Term Debt was $399 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(460.324 / 2595.281)||/||(367.052 / 2579.068)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(216.198 / 2579.068)||/||(226.851 / 2595.281)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (1149.092 + 305.055) / 3559.607)||/||(1 - (1180.521 + 268.283) / 2889.878)|
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.
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))|
|=||(57.263 / (57.263 + 268.283))||/||(54.837 / (54.837 + 305.055))|
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)|
|=||(535.646 / 2595.281)||/||(540.212 / 2579.068)|
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)|
|=||((749.17 + 668.902) / 3559.607)||/||((399.092 + 511.888) / 2889.878)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(219.502 - 2.733||-||239.432)||/||3559.607|
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.
Crane Company has a M-score of -2.27 suggests that the company will not be a manipulator.
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
Crane Company Annual Data
Crane Company Quarterly Data