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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.
Devon Energy Corp has a M-score of -2.44 suggests that the company is not a 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 * 1.0479||+||0.528 * 1.192||+||0.404 * 1.1299||+||0.892 * 1.4277||+||0.115 * 1.2783|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7373||+||4.679 * -0.1312||-||0.327 * 1.0112|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $2,301 Mil.|
Revenue was 4510 + 3725 + 2614 + 2720 = $13,569 Mil.
Gross Profit was 1922 + 1822 + 1605 + 1737 = $7,086 Mil.
Total Current Assets was $4,392 Mil.
Total Assets was $51,115 Mil.
Property, Plant and Equipment(Net PPE) was $36,999 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,969 Mil.
Selling, General & Admin. Expense(SGA) was $700 Mil.
Total Current Liabilities was $4,679 Mil.
Long-Term Debt was $11,880 Mil.
Net Income was 675 + 324 + 207 + 429 = $1,635 Mil.
Non Operating Income was -89 + -24 + 1978 + -23 = $1,842 Mil.
Cash Flow from Operations was 2049 + 1410 + 1437 + 1601 = $6,497 Mil.
|Accounts Receivable was $1,538 Mil.
Revenue was 3088 + 1971 + 2580 + 1865 = $9,504 Mil.
Gross Profit was 2147 + 1083 + 1647 + 1039 = $5,916 Mil.
Total Current Assets was $6,357 Mil.
Total Assets was $40,020 Mil.
Property, Plant and Equipment(Net PPE) was $26,925 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,825 Mil.
Selling, General & Admin. Expense(SGA) was $665 Mil.
Total Current Liabilities was $4,865 Mil.
Long-Term Debt was $7,956 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)|
|=||(2301 / 13569)||/||(1538 / 9504)|
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)|
|=||(1822 / 9504)||/||(1922 / 13569)|
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 - (4392 + 36999) / 51115)||/||(1 - (6357 + 26925) / 40020)|
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))|
|=||(2825 / (2825 + 26925))||/||(2969 / (2969 + 36999))|
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)|
|=||(700 / 13569)||/||(665 / 9504)|
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)|
|=||((11880 + 4679) / 51115)||/||((7956 + 4865) / 40020)|
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|
|=||(1635 - 1842||-||6497)||/||51115|
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 -2.44 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