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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.
During the past 13 years, the highest Beneish M-Score of Devon Energy Corp was 6.59. The lowest was -8.10. 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 Devon Energy Corp 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 * 1.2413||+||0.528 * 10.7675||+||0.404 * 1.1934||+||0.892 * 0.6171||+||0.115 * 0.8901|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 7.738||+||4.679 * -0.5736||-||0.327 * 1.482|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $992 Mil.|
Revenue was 2488 + 2126 + 2886 + 3601 = $11,101 Mil.
Gross Profit was 734 + 616 + -4013 + 3091 = $428 Mil.
Total Current Assets was $3,982 Mil.
Total Assets was $27,244 Mil.
Property, Plant and Equipment(Net PPE) was $16,815 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,411 Mil.
Selling, General & Admin. Expense(SGA) was $-2,569 Mil.
Total Current Liabilities was $2,929 Mil.
Long-Term Debt was $12,357 Mil.
Net Income was -1570 + -3056 + -4532 + -3507 = $-12,665 Mil.
Non Operating Income was -92 + -30 + 18 + -51 = $-155 Mil.
Cash Flow from Operations was 335 + 149 + 1081 + 1553 = $3,118 Mil.
|Accounts Receivable was $1,295 Mil.
Revenue was 3393 + 3265 + 5995 + 5336 = $17,989 Mil.
Gross Profit was 2831 + 1273 + -1388 + 4752 = $7,468 Mil.
Total Current Assets was $4,730 Mil.
Total Assets was $40,606 Mil.
Property, Plant and Equipment(Net PPE) was $27,824 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,496 Mil.
Selling, General & Admin. Expense(SGA) was $-538 Mil.
Total Current Liabilities was $3,998 Mil.
Long-Term Debt was $11,375 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)|
|=||(992 / 11101)||/||(1295 / 17989)|
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)|
|=||(7468 / 17989)||/||(428 / 11101)|
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 - (3982 + 16815) / 27244)||/||(1 - (4730 + 27824) / 40606)|
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))|
|=||(3496 / (3496 + 27824))||/||(2411 / (2411 + 16815))|
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)|
|=||(-2569 / 11101)||/||(-538 / 17989)|
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)|
|=||((12357 + 2929) / 27244)||/||((11375 + 3998) / 40606)|
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|
|=||(-12665 - -155||-||3118)||/||27244|
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.
Devon Energy Corp has a M-score of -1.38 signals that the company is likely to 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
Devon Energy Corp Annual Data
Devon Energy Corp Quarterly Data