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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 -2.19. The lowest was -4.58. And the median was -2.83.
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 * 1.9883||+||0.528 * 1.7801||+||0.404 * 1.1788||+||0.892 * 0.6599||+||0.115 * 1.3739|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.7028||+||4.679 * -0.152||-||0.327 * 0.9206|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $555 Mil.|
Revenue was 822 + 979 + 364 + 753 = $2,918 Mil.
Gross Profit was 221 + 415 + -124 + 222 = $734 Mil.
Total Current Assets was $1,923 Mil.
Total Assets was $14,653 Mil.
Property, Plant and Equipment(Net PPE) was $8,139 Mil.
Depreciation, Depletion and Amortization(DDA) was $859 Mil.
Selling, General & Admin. Expense(SGA) was $309 Mil.
Total Current Liabilities was $1,562 Mil.
Long-Term Debt was $4,502 Mil.
Net Income was -281 + 317 + -601 + -379 = $-944 Mil.
Non Operating Income was 1325 + 338 + -546 + -459 = $658 Mil.
Cash Flow from Operations was 199 + 186 + 83 + 157 = $625 Mil.
|Accounts Receivable was $423 Mil.
Revenue was 1031 + 1312 + 830 + 1249 = $4,422 Mil.
Gross Profit was 468 + 716 + 216 + 580 = $1,980 Mil.
Total Current Assets was $1,607 Mil.
Total Assets was $15,614 Mil.
Property, Plant and Equipment(Net PPE) was $9,857 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,488 Mil.
Selling, General & Admin. Expense(SGA) was $275 Mil.
Total Current Liabilities was $1,333 Mil.
Long-Term Debt was $5,686 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)|
|=||(555 / 2918)||/||(423 / 4422)|
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)|
|=||(1980 / 4422)||/||(734 / 2918)|
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 - (1923 + 8139) / 14653)||/||(1 - (1607 + 9857) / 15614)|
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))|
|=||(1488 / (1488 + 9857))||/||(859 / (859 + 8139))|
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)|
|=||(309 / 2918)||/||(275 / 4422)|
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)|
|=||((4502 + 1562) / 14653)||/||((5686 + 1333) / 15614)|
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|
|=||(-944 - 658||-||625)||/||14653|
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 -2.15 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