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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 -7.94. And the median was -2.56.
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 * 0.5215||+||0.528 * 1.1653||+||0.404 * 0.9116||+||0.892 * 1.5725||+||0.115 * 0.6968|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.832||+||4.679 * -0.1846||-||0.327 * 0.9554|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $1,613 Mil.|
Revenue was 3265 + 5995 + 5336 + 4510 = $19,106 Mil.
Gross Profit was 1273 + 3704 + 2971 + 1922 = $9,870 Mil.
Total Current Assets was $5,806 Mil.
Total Assets was $45,342 Mil.
Property, Plant and Equipment(Net PPE) was $31,455 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,510 Mil.
Selling, General & Admin. Expense(SGA) was $887 Mil.
Total Current Liabilities was $5,560 Mil.
Long-Term Debt was $10,301 Mil.
Net Income was -3599 + -408 + 1016 + 675 = $-2,316 Mil.
Non Operating Income was -15 + -39 + -10 + -100 = $-164 Mil.
Cash Flow from Operations was 1648 + 963 + 1559 + 2049 = $6,219 Mil.
|Accounts Receivable was $1,967 Mil.
Revenue was 3725 + 2614 + 2720 + 3091 = $12,150 Mil.
Gross Profit was 1822 + 1605 + 1737 + 2150 = $7,314 Mil.
Total Current Assets was $5,020 Mil.
Total Assets was $52,765 Mil.
Property, Plant and Equipment(Net PPE) was $37,429 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,815 Mil.
Selling, General & Admin. Expense(SGA) was $678 Mil.
Total Current Liabilities was $7,580 Mil.
Long-Term Debt was $11,739 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)|
|=||(1613 / 19106)||/||(1967 / 12150)|
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)|
|=||(3704 / 12150)||/||(1273 / 19106)|
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 - (5806 + 31455) / 45342)||/||(1 - (5020 + 37429) / 52765)|
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))|
|=||(2815 / (2815 + 37429))||/||(3510 / (3510 + 31455))|
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)|
|=||(887 / 19106)||/||(678 / 12150)|
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)|
|=||((10301 + 5560) / 45342)||/||((11739 + 7580) / 52765)|
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|
|=||(-2316 - -164||-||6219)||/||45342|
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 -3.21 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
Devon Energy Corp Annual Data
Devon Energy Corp Quarterly Data