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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 -2.28. The lowest was -3.60. And the median was -2.79.
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 * 0.7917||+||0.528 * 1.0511||+||0.404 * 1.0699||+||0.892 * 1.023||+||0.115 * 0.9407|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0302||+||4.679 * -0.0393||-||0.327 * 1.0145|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $52.8 Mil.|
Revenue was 164.544 + 151.363 + 171.512 + 149.782 = $637.2 Mil.
Gross Profit was 75.593 + 67.263 + 86.043 + 65.137 = $294.0 Mil.
Total Current Assets was $204.9 Mil.
Total Assets was $2,407.6 Mil.
Property, Plant and Equipment(Net PPE) was $1,945.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $86.3 Mil.
Selling, General & Admin. Expense(SGA) was $39.5 Mil.
Total Current Liabilities was $160.2 Mil.
Long-Term Debt was $803.1 Mil.
Net Income was 14.637 + 11.112 + 23.892 + 11.194 = $60.8 Mil.
Non Operating Income was 0.393 + -1.064 + 2.563 + 2.097 = $4.0 Mil.
Cash Flow from Operations was 54.752 + 28.847 + 53.332 + 14.472 = $151.4 Mil.
|Accounts Receivable was $65.1 Mil.
Revenue was 179.673 + 149.058 + 157.486 + 136.646 = $622.9 Mil.
Gross Profit was 81.085 + 70.816 + 85.331 + 64.873 = $302.1 Mil.
Total Current Assets was $164.4 Mil.
Total Assets was $2,168.5 Mil.
Property, Plant and Equipment(Net PPE) was $1,787.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $74.4 Mil.
Selling, General & Admin. Expense(SGA) was $37.5 Mil.
Total Current Liabilities was $111.8 Mil.
Long-Term Debt was $743.4 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)|
|=||(52.755 / 637.201)||/||(65.135 / 622.863)|
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)|
|=||(67.263 / 622.863)||/||(75.593 / 637.201)|
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 - (204.856 + 1945.915) / 2407.579)||/||(1 - (164.387 + 1787.889) / 2168.471)|
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))|
|=||(74.412 / (74.412 + 1787.889))||/||(86.319 / (86.319 + 1945.915))|
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)|
|=||(39.484 / 637.201)||/||(37.465 / 622.863)|
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)|
|=||((803.126 + 160.165) / 2407.579)||/||((743.37 + 111.821) / 2168.471)|
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|
|=||(60.835 - 3.989||-||151.403)||/||2407.579|
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 -2.80 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