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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 -2.15. The lowest was -3.99. And the median was -2.85.
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 * 1.0362||+||0.528 * 0.9058||+||0.404 * 0.8078||+||0.892 * 1.3689||+||0.115 * 1.5277|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.5441||+||4.679 * -0.0889||-||0.327 * 0.7614|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|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 $24,621 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 $2,406 Mil.
Long-Term Debt was $7,813 Mil.
Net Income was 198 + 2807 + 271 + 116 = $3,392 Mil.
Non Operating Income was -241 + 3024 + 355 + -225 = $2,913 Mil.
Cash Flow from Operations was 261 + 696 + 767 + 943 = $2,667 Mil.
|Accounts Receivable was $858 Mil.
Revenue was 1423 + 1392 + 1984 + 1059 = $5,858 Mil.
Gross Profit was 622 + 691 + 1281 + 354 = $2,948 Mil.
Total Current Assets was $4,290 Mil.
Total Assets was $17,648 Mil.
Property, Plant and Equipment(Net PPE) was $10,035 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,565 Mil.
Selling, General & Admin. Expense(SGA) was $439 Mil.
Total Current Liabilities was $2,952 Mil.
Long-Term Debt was $6,668 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)|
|=||(1217 / 8019)||/||(858 / 5858)|
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)|
|=||(1234 / 5858)||/||(1337 / 8019)|
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 - (2861 + 18015) / 24621)||/||(1 - (4290 + 10035) / 17648)|
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))|
|=||(1565 / (1565 + 10035))||/||(1745 / (1745 + 18015))|
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)|
|=||(327 / 8019)||/||(439 / 5858)|
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)|
|=||((7813 + 2406) / 24621)||/||((6668 + 2952) / 17648)|
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|
|=||(3392 - 2913||-||2667)||/||24621|
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 -2.44 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