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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.
Encana Corp has a M-score of -3.08 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Encana Corp was 6.11. The lowest was -4.24. And the median was -2.67.
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 * 1.0077||+||0.528 * 1.0447||+||0.404 * 0.85||+||0.892 * 1.1096||+||0.115 * 1.1782|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1138||+||4.679 * -0.1525||-||0.327 * 0.8651|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $1,732 Mil.|
Revenue was 1588 + 1892 + 1423 + 1392 = $6,295 Mil.
Gross Profit was 835 + 1049 + 622 + 691 = $3,197 Mil.
Total Current Assets was $4,574 Mil.
Total Assets was $18,722 Mil.
Property, Plant and Equipment(Net PPE) was $11,064 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,594 Mil.
Selling, General & Admin. Expense(SGA) was $461 Mil.
Total Current Liabilities was $2,226 Mil.
Long-Term Debt was $6,121 Mil.
Net Income was 271 + 116 + -251 + 188 = $324 Mil.
Non Operating Income was 355 + -225 + -164 + 106 = $72 Mil.
Cash Flow from Operations was 767 + 943 + 462 + 935 = $3,107 Mil.
|Accounts Receivable was $1,549 Mil.
Revenue was 1984 + 1059 + 1605 + 1025 = $5,673 Mil.
Gross Profit was 1281 + 354 + 984 + 391 = $3,010 Mil.
Total Current Assets was $4,965 Mil.
Total Assets was $18,163 Mil.
Property, Plant and Equipment(Net PPE) was $9,678 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,686 Mil.
Selling, General & Admin. Expense(SGA) was $373 Mil.
Total Current Liabilities was $3,156 Mil.
Long-Term Debt was $6,205 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)|
|=||(1732 / 6295)||/||(1549 / 5673)|
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)|
|=||(1049 / 5673)||/||(835 / 6295)|
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 - (4574 + 11064) / 18722)||/||(1 - (4965 + 9678) / 18163)|
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))|
|=||(1686 / (1686 + 9678))||/||(1594 / (1594 + 11064))|
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)|
|=||(461 / 6295)||/||(373 / 5673)|
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)|
|=||((6121 + 2226) / 18722)||/||((6205 + 3156) / 18163)|
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|
|=||(324 - 72||-||3107)||/||18722|
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 -3.08 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