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CommonWealth REIT (NYSE:CWH)
Beneish M-Score
-2.41 (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.

CommonWealth REIT has a M-score of -2.41 suggests that the company is not a manipulator.

CWH' s 10-Year Beneish M-Score Range
Min: -3.4   Max: -1.48
Current: -2.41

-3.4
-1.48

During the past 13 years, the highest Beneish M-Score of CommonWealth REIT was -1.48. The lowest was -3.40. And the median was -2.62.


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 CommonWealth REIT 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 * 0.9754+0.528 * 1.0627+0.404 * 2.4696+0.892 * 0.9182+0.115 * 0.8332
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.7716+4.679 * -0.067-0.327 * 0.9968
=-2.41

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

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $239.8 Mil.
Revenue was 217.26 + 186.329 + 201.741 + 274.766 = $880.1 Mil.
Gross Profit was 115.529 + 103.11 + 107.109 + 165.012 = $490.8 Mil.
Total Current Assets was $434.8 Mil.
Total Assets was $6,600.7 Mil.
Property, Plant and Equipment(Net PPE) was $4,980.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $187.0 Mil.
Selling, General & Admin. Expense(SGA) was $87.3 Mil.
Total Current Liabilities was $228.6 Mil.
Long-Term Debt was $2,989.9 Mil.
Net Income was 20.448 + -5.301 + -216.315 + 18.889 = $-182.3 Mil.
Non Operating Income was 0.109 + 10.816 + 10.492 + 0.159 = $21.6 Mil.
Cash Flow from Operations was 46.627 + 44.991 + 52.959 + 93.869 = $238.4 Mil.
Accounts Receivable was $267.7 Mil.
Revenue was 262.612 + 219.318 + 226.802 + 249.797 = $958.5 Mil.
Gross Profit was 158.482 + 127.941 + 134.797 + 146.763 = $568.0 Mil.
Total Current Assets was $552.9 Mil.
Total Assets was $8,082.7 Mil.
Property, Plant and Equipment(Net PPE) was $6,942.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $215.8 Mil.
Selling, General & Admin. Expense(SGA) was $53.7 Mil.
Total Current Liabilities was $295.7 Mil.
Long-Term Debt was $3,658.2 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)
=(239.766 / 880.096) / (267.733 / 958.529)
=0.27243164 / 0.27931654
=0.9754

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)
=(103.11 / 958.529) / (115.529 / 880.096)
=0.59255693 / 0.55762099
=1.0627

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 - (434.762 + 4980.74) / 6600.714) / (1 - (552.938 + 6942.072) / 8082.668)
=0.17955815 / 0.07270594
=2.4696

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
=880.096 / 958.529
=0.9182

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))
=(215.784 / (215.784 + 6942.072)) / (186.967 / (186.967 + 4980.74))
=0.03014646 / 0.03617988
=0.8332

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)
=(87.334 / 880.096) / (53.69 / 958.529)
=0.09923236 / 0.05601291
=1.7716

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)
=((2989.939 + 228.639) / 6600.714) / ((3658.214 + 295.73) / 8082.668)
=0.48761058 / 0.48918798
=0.9968

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
=(-182.279 - 21.576 - 238.446) / 6600.714
=-0.067

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.

CommonWealth REIT has a M-score of -2.41 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.

CommonWealth REIT Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.16510.93171.07050.96951.01841.15440.8795
GMI 01.02391.00521.0110.98310.98091.0249
AQI 1.09190.83771.45081.05480.88741.73631.901
SGI 0.98461.06710.92231.01491.11731.00881.0041
DEPI 1.23040.8461.01610.88051.22390.95310.7264
SGAI 1.06551.02371.07681.07050.98391.04521.6695
LVGI 0.88951.31381.02750.99320.99311.08460.8562
TATA -0.025-0.0086-0.0242-0.0272-0.0236-0.0477-0.0668
M-score -2.90-2.70-2.43-2.62-2.49-2.31-2.62

CommonWealth REIT Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 1.03370.98351.02871.10371.08391.11811.11220.85430.89630.9754
GMI 0.98190.96470.96420.95130.98770.99860.99371.02861.02571.0627
AQI 0.88740.93811.36021.28361.73630.73750.95612.14621.9012.4696
SGI 1.10081.11991.12851.0491.07441.05691.04761.03750.98530.9182
DEPI 1.22391.33561.04371.22190.95310.85490.94940.59720.72640.8332
SGAI 0.9880.94380.91210.95691.03471.14781.32431.57331.65421.7716
LVGI 0.99310.96911.02251.07381.08460.95130.93760.88780.85620.9968
TATA -0.0236-0.0271-0.0267-0.0244-0.0475-0.0492-0.0479-0.0926-0.0661-0.067
M-score -2.49-2.50-2.32-2.36-2.31-2.68-2.62-2.64-2.62-2.41
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