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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 Encana Corp was 19.26. The lowest was -4.51. And the median was -2.66.
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 * 0.6833||+||0.528 * 1.0075||+||0.404 * 0.8727||+||0.892 * 1.1024||+||0.115 * 1.3037|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.6041||+||4.679 * -0.0527||-||0.327 * 0.8463|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $940 Mil.|
Revenue was 1249 + 2254 + 2285 + 1588 = $7,376 Mil.
Gross Profit was 580 + 1337 + 1234 + 835 = $3,986 Mil.
Total Current Assets was $4,062 Mil.
Total Assets was $22,836 Mil.
Property, Plant and Equipment(Net PPE) was $15,162 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,793 Mil.
Selling, General & Admin. Expense(SGA) was $297 Mil.
Total Current Liabilities was $3,314 Mil.
Long-Term Debt was $6,349 Mil.
Net Income was -1707 + 198 + 2807 + 271 = $1,569 Mil.
Non Operating Income was -2571 + -241 + 3024 + 355 = $567 Mil.
Cash Flow from Operations was 482 + 261 + 696 + 767 = $2,206 Mil.
|Accounts Receivable was $1,248 Mil.
Revenue was 1892 + 1423 + 1392 + 1984 = $6,691 Mil.
Gross Profit was 1049 + 622 + 691 + 1281 = $3,643 Mil.
Total Current Assets was $4,146 Mil.
Total Assets was $17,192 Mil.
Property, Plant and Equipment(Net PPE) was $9,930 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,588 Mil.
Selling, General & Admin. Expense(SGA) was $446 Mil.
Total Current Liabilities was $2,500 Mil.
Long-Term Debt was $6,096 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)|
|=||(940 / 7376)||/||(1248 / 6691)|
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)|
|=||(1337 / 6691)||/||(580 / 7376)|
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 - (4062 + 15162) / 22836)||/||(1 - (4146 + 9930) / 17192)|
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))|
|=||(1588 / (1588 + 9930))||/||(1793 / (1793 + 15162))|
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)|
|=||(297 / 7376)||/||(446 / 6691)|
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)|
|=||((6349 + 3314) / 22836)||/||((6096 + 2500) / 17192)|
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|
|=||(1569 - 567||-||2206)||/||22836|
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 -2.82 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
Encana Corp Annual Data
Encana Corp Quarterly Data