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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 * 1.1191||+||0.528 * 2.1315||+||0.404 * 1.2585||+||0.892 * 0.6284||+||0.115 * 0.8059|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 2.4404||+||4.679 * -0.6193||-||0.327 * 1.4769|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $827 Mil.|
Revenue was 2126 + 2886 + 3601 + 3393 = $12,006 Mil.
Gross Profit was 616 + -4013 + 3091 + 2831 = $2,525 Mil.
Total Current Assets was $2,950 Mil.
Total Assets was $28,637 Mil.
Property, Plant and Equipment(Net PPE) was $19,264 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,741 Mil.
Selling, General & Admin. Expense(SGA) was $-641 Mil.
Total Current Liabilities was $2,600 Mil.
Long-Term Debt was $12,195 Mil.
Net Income was -3056 + -4532 + -3507 + -2816 = $-13,911 Mil.
Non Operating Income was -30 + 18 + -51 + 4 = $-59 Mil.
Cash Flow from Operations was 149 + 1081 + 1553 + 1101 = $3,884 Mil.
|Accounts Receivable was $1,176 Mil.
Revenue was 3265 + 5995 + 5336 + 4510 = $19,106 Mil.
Gross Profit was 1273 + -1388 + 4752 + 3928 = $8,565 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 $-418 Mil.
Total Current Liabilities was $5,560 Mil.
Long-Term Debt was $10,301 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)|
|=||(827 / 12006)||/||(1176 / 19106)|
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)|
|=||(8565 / 19106)||/||(2525 / 12006)|
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 - (2950 + 19264) / 28637)||/||(1 - (5806 + 31455) / 45342)|
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))|
|=||(3510 / (3510 + 31455))||/||(2741 / (2741 + 19264))|
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)|
|=||(-641 / 12006)||/||(-418 / 19106)|
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)|
|=||((12195 + 2600) / 28637)||/||((10301 + 5560) / 45342)|
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|
|=||(-13911 - -59||-||3884)||/||28637|
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 -5.32 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