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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 * 1.3395||+||0.528 * 1.0331||+||0.404 * 0.9788||+||0.892 * 0.9719||+||0.115 * 1.0564|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 2.7935||+||4.679 * -0.0565||-||0.327 * 0.9694|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $66.7 Mil.|
Revenue was 175.354 + 139.32 + 151.315 + 136.758 = $602.7 Mil.
Gross Profit was 101.474 + 100.337 + 78.069 + 18.67 = $298.6 Mil.
Total Current Assets was $177.8 Mil.
Total Assets was $2,476.6 Mil.
Property, Plant and Equipment(Net PPE) was $2,049.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $85.3 Mil.
Selling, General & Admin. Expense(SGA) was $9.6 Mil.
Total Current Liabilities was $139.6 Mil.
Long-Term Debt was $829.6 Mil.
Net Income was 27.505 + 9.225 + 14.009 + 9.905 = $60.6 Mil.
Non Operating Income was -0.07 + 0.818 + 1.332 + 3.747 = $5.8 Mil.
Cash Flow from Operations was 73.212 + 30.976 + 51.375 + 39.142 = $194.7 Mil.
|Accounts Receivable was $51.2 Mil.
Revenue was 169.714 + 134.557 + 164.544 + 151.363 = $620.2 Mil.
Gross Profit was 94.181 + 93.363 + 75.593 + 54.228 = $317.4 Mil.
Total Current Assets was $200.8 Mil.
Total Assets was $2,462.8 Mil.
Property, Plant and Equipment(Net PPE) was $2,008.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $88.5 Mil.
Selling, General & Admin. Expense(SGA) was $3.5 Mil.
Total Current Liabilities was $131.3 Mil.
Long-Term Debt was $863.0 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)|
|=||(66.708 / 602.747)||/||(51.239 / 620.178)|
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)|
|=||(317.365 / 620.178)||/||(298.55 / 602.747)|
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 - (177.834 + 2048.97) / 2476.557)||/||(1 - (200.798 + 2008.307) / 2462.843)|
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))|
|=||(88.527 / (88.527 + 2008.307))||/||(85.295 / (85.295 + 2048.97))|
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)|
|=||(9.562 / 602.747)||/||(3.522 / 620.178)|
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)|
|=||((829.626 + 139.55) / 2476.557)||/||((862.999 + 131.28) / 2462.843)|
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|
|=||(60.644 - 5.827||-||194.705)||/||2476.557|
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 -2.74 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