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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 -1.72. The lowest was -3.99. And the median was -2.82.
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 * 0.897||+||0.528 * 1.2407||+||0.404 * 1.7933||+||0.892 * 0.5514||+||0.115 * 0.6733|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.5251||+||4.679 * 0.1723||-||0.327 * 1.0954|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $602 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 $15,644 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 $5,716 Mil.
Net Income was -612 + -1236 + -1610 + -1707 = $-5,165 Mil.
Non Operating Income was -6707 + -347 + 84 + -2571 = $-9,541 Mil.
Cash Flow from Operations was 448 + 453 + 298 + 482 = $1,681 Mil.
|Accounts Receivable was $1,217 Mil.
Revenue was 2254 + 2285 + 1588 + 1892 = $8,019 Mil.
Gross Profit was 1337 + 1234 + 835 + 1049 = $4,455 Mil.
Total Current Assets was $2,861 Mil.
Total Assets was $24,531 Mil.
Property, Plant and Equipment(Net PPE) was $18,015 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,745 Mil.
Selling, General & Admin. Expense(SGA) was $327 Mil.
Total Current Liabilities was $2,278 Mil.
Long-Term Debt was $7,813 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)|
|=||(602 / 4422)||/||(1217 / 8019)|
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)|
|=||(716 / 8019)||/||(468 / 4422)|
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 - (1607 + 9857) / 15644)||/||(1 - (2861 + 18015) / 24531)|
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))|
|=||(1745 / (1745 + 18015))||/||(1488 / (1488 + 9857))|
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)|
|=||(275 / 4422)||/||(327 / 8019)|
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)|
|=||((5716 + 1333) / 15644)||/||((7813 + 2278) / 24531)|
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|
|=||(-5165 - -9541||-||1681)||/||15644|
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 -1.88 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