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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.
CommonWealth REIT has a M-score of -2.41 suggests that the company is not a manipulator.
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.
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|
|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
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)|
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)|
|=||(103.11 / 958.529)||/||(115.529 / 880.096)|
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 - (434.762 + 4980.74) / 6600.714)||/||(1 - (552.938 + 6942.072) / 8082.668)|
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))|
|=||(215.784 / (215.784 + 6942.072))||/||(186.967 / (186.967 + 4980.74))|
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)|
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)|
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|
|=||(-182.279 - 21.576||-||238.446)||/||6600.714|
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.
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
CommonWealth REIT Annual Data
CommonWealth REIT Quarterly Data