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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 * 0.7012||+||0.528 * 2.0938||+||0.404 * 1.1108||+||0.892 * 1.0043||+||0.115 * 0.6276|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * -0.149||+||4.679 * -0.451||-||0.327 * 1.3651|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $1,100 Mil.|
Revenue was 3601 + 3393 + 3265 + 5995 = $16,254 Mil.
Gross Profit was 3091 + 2831 + 1273 + -1388 = $5,807 Mil.
Total Current Assets was $4,298 Mil.
Total Assets was $34,351 Mil.
Property, Plant and Equipment(Net PPE) was $22,775 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,398 Mil.
Selling, General & Admin. Expense(SGA) was $-679 Mil.
Total Current Liabilities was $3,501 Mil.
Long-Term Debt was $11,400 Mil.
Net Income was -3507 + -2816 + -3599 + -408 = $-10,330 Mil.
Non Operating Income was -51 + 4 + -15 + -39 = $-101 Mil.
Cash Flow from Operations was 1553 + 1101 + 1648 + 963 = $5,265 Mil.
|Accounts Receivable was $1,562 Mil.
Revenue was 5336 + 4510 + 3725 + 2614 = $16,185 Mil.
Gross Profit was 4752 + 3928 + 1822 + 1605 = $12,107 Mil.
Total Current Assets was $5,973 Mil.
Total Assets was $50,839 Mil.
Property, Plant and Equipment(Net PPE) was $35,169 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,120 Mil.
Selling, General & Admin. Expense(SGA) was $4,539 Mil.
Total Current Liabilities was $5,994 Mil.
Long-Term Debt was $10,161 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)|
|=||(1100 / 16254)||/||(1562 / 16185)|
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)|
|=||(2831 / 16185)||/||(3091 / 16254)|
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 - (4298 + 22775) / 34351)||/||(1 - (5973 + 35169) / 50839)|
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))|
|=||(3120 / (3120 + 35169))||/||(3398 / (3398 + 22775))|
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)|
|=||(-679 / 16254)||/||(4539 / 16185)|
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)|
|=||((11400 + 3501) / 34351)||/||((10161 + 5994) / 50839)|
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|
|=||(-10330 - -101||-||5265)||/||34351|
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 -4.20 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