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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 -2.76.
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 * 0.952||+||0.528 * 0.9098||+||0.404 * 0.9694||+||0.892 * 0.9283||+||0.115 * 0.9862|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7421||+||4.679 * -0.0541||-||0.327 * 0.9899|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $40.2 Mil.|
Revenue was 136.758 + 169.714 + 134.557 + 164.544 = $605.6 Mil.
Gross Profit was 55.973 + 82.727 + 65.694 + 75.593 = $280.0 Mil.
Total Current Assets was $173.7 Mil.
Total Assets was $2,455.3 Mil.
Property, Plant and Equipment(Net PPE) was $2,020.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $88.8 Mil.
Selling, General & Admin. Expense(SGA) was $-12.9 Mil.
Total Current Liabilities was $155.5 Mil.
Long-Term Debt was $837.9 Mil.
Net Income was 9.905 + 25.285 + 6.77 + 14.637 = $56.6 Mil.
Non Operating Income was 2.497 + 0.581 + 1.023 + 0.393 = $4.5 Mil.
Cash Flow from Operations was 39.142 + 71.593 + 19.345 + 54.752 = $184.8 Mil.
|Accounts Receivable was $45.4 Mil.
Revenue was 151.363 + 171.512 + 149.782 + 179.673 = $652.3 Mil.
Gross Profit was 54.228 + 73.953 + 65.137 + 81.085 = $274.4 Mil.
Total Current Assets was $200.6 Mil.
Total Assets was $2,371.1 Mil.
Property, Plant and Equipment(Net PPE) was $1,910.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $82.8 Mil.
Selling, General & Admin. Expense(SGA) was $-18.8 Mil.
Total Current Liabilities was $166.0 Mil.
Long-Term Debt was $803.2 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)|
|=||(40.162 / 605.573)||/||(45.444 / 652.33)|
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)|
|=||(82.727 / 652.33)||/||(55.973 / 605.573)|
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 - (173.746 + 2020.386) / 2455.303)||/||(1 - (200.607 + 1910.272) / 2371.056)|
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))|
|=||(82.754 / (82.754 + 1910.272))||/||(88.801 / (88.801 + 2020.386))|
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)|
|=||(-12.939 / 605.573)||/||(-18.782 / 652.33)|
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)|
|=||((837.947 + 155.469) / 2455.303)||/||((803.189 + 165.977) / 2371.056)|
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|
|=||(56.597 - 4.494||-||184.832)||/||2455.303|
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 -2.86 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