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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 Empire District Electric Co was -1.50. The lowest was -5.09. And the median was -2.74.
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 Empire District Electric Co 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 * 1.4056||+||0.528 * 0.8996||+||0.404 * 0.9824||+||0.892 * 0.96||+||0.115 * 1.0897|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 5.7965||+||4.679 * -0.0567||-||0.327 * 0.9681|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $58.1 Mil.|
Revenue was 139.32 + 151.315 + 136.758 + 169.714 = $597.1 Mil.
Gross Profit was 100.337 + 78.069 + 55.973 + 82.727 = $317.1 Mil.
Total Current Assets was $167.3 Mil.
Total Assets was $2,468.6 Mil.
Property, Plant and Equipment(Net PPE) was $2,048.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $83.9 Mil.
Selling, General & Admin. Expense(SGA) was $8.3 Mil.
Total Current Liabilities was $151.4 Mil.
Long-Term Debt was $829.5 Mil.
Net Income was 9.225 + 14.009 + 9.905 + 25.285 = $58.4 Mil.
Non Operating Income was 0.818 + 1.332 + 2.497 + 0.581 = $5.2 Mil.
Cash Flow from Operations was 30.976 + 51.375 + 39.142 + 71.593 = $193.1 Mil.
|Accounts Receivable was $43.1 Mil.
Revenue was 134.557 + 164.544 + 151.363 + 171.512 = $622.0 Mil.
Gross Profit was 93.363 + 75.593 + 54.228 + 73.953 = $297.1 Mil.
Total Current Assets was $196.2 Mil.
Total Assets was $2,434.7 Mil.
Property, Plant and Equipment(Net PPE) was $1,984.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $88.9 Mil.
Selling, General & Admin. Expense(SGA) was $1.5 Mil.
Total Current Liabilities was $196.4 Mil.
Long-Term Debt was $803.1 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)|
|=||(58.114 / 597.107)||/||(43.068 / 621.976)|
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)|
|=||(297.137 / 621.976)||/||(317.106 / 597.107)|
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 - (167.288 + 2048.583) / 2468.635)||/||(1 - (196.224 + 1984.757) / 2434.745)|
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))|
|=||(88.925 / (88.925 + 1984.757))||/||(83.918 / (83.918 + 2048.583))|
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)|
|=||(8.297 / 597.107)||/||(1.491 / 621.976)|
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)|
|=||((829.537 + 151.431) / 2468.635)||/||((803.063 + 196.369) / 2434.745)|
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|
|=||(58.424 - 5.228||-||193.086)||/||2468.635|
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.
Empire District Electric Co has a M-score of -3.27 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
Empire District Electric Co Annual Data
Empire District Electric Co Quarterly Data