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Beneish M-Score -0.73 higher than -2.22, which implies that it might have manipulated its financial results.
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 Encana Corp was 19.02. The lowest was -4.75. And the median was -2.52.
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 Encana 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 * 1.6096||+||0.528 * 1.3731||+||0.404 * 1.7474||+||0.892 * 0.5228||+||0.115 * 1.0365|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.7505||+||4.679 * 0.274||-||0.327 * 1.1941|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $632 Mil.|
Revenue was 364 + 753 + 1031 + 1312 = $3,460 Mil.
Gross Profit was -124 + 222 + 468 + 716 = $1,282 Mil.
Total Current Assets was $1,280 Mil.
Total Assets was $14,926 Mil.
Property, Plant and Equipment(Net PPE) was $8,692 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,119 Mil.
Selling, General & Admin. Expense(SGA) was $259 Mil.
Total Current Liabilities was $1,379 Mil.
Long-Term Debt was $6,033 Mil.
Net Income was -601 + -379 + -612 + -1236 = $-2,828 Mil.
Non Operating Income was -546 + -459 + -6707 + -347 = $-8,059 Mil.
Cash Flow from Operations was 83 + 157 + 448 + 453 = $1,141 Mil.
|Accounts Receivable was $751 Mil.
Revenue was 830 + 1249 + 2254 + 2285 = $6,618 Mil.
Gross Profit was 216 + 580 + 1337 + 1234 = $3,367 Mil.
Total Current Assets was $2,097 Mil.
Total Assets was $19,043 Mil.
Property, Plant and Equipment(Net PPE) was $13,329 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,787 Mil.
Selling, General & Admin. Expense(SGA) was $283 Mil.
Total Current Liabilities was $1,807 Mil.
Long-Term Debt was $6,112 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)|
|=||(632 / 3460)||/||(751 / 6618)|
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)|
|=||(3367 / 6618)||/||(1282 / 3460)|
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 - (1280 + 8692) / 14926)||/||(1 - (2097 + 13329) / 19043)|
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))|
|=||(1787 / (1787 + 13329))||/||(1119 / (1119 + 8692))|
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)|
|=||(259 / 3460)||/||(283 / 6618)|
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)|
|=||((6033 + 1379) / 14926)||/||((6112 + 1807) / 19043)|
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|
|=||(-2828 - -8059||-||1141)||/||14926|
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.
Encana Corp has a M-score of -0.75 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
Encana Corp Annual Data
Encana Corp Quarterly Data