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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 -1.99. 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 * 1.3385||+||0.528 * 0.9677||+||0.404 * 0.9667||+||0.892 * 0.9296||+||0.115 * 1.0516|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * -0.0948||+||4.679 * -0.0534||-||0.327 * 0.9904|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $65.6 Mil.|
Revenue was 151.315 + 136.758 + 169.714 + 134.557 = $592.3 Mil.
Gross Profit was 78.069 + 55.973 + 82.727 + 65.694 = $282.5 Mil.
Total Current Assets was $161.9 Mil.
Total Assets was $2,450.9 Mil.
Property, Plant and Equipment(Net PPE) was $2,036.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $85.7 Mil.
Selling, General & Admin. Expense(SGA) was $-4.3 Mil.
Total Current Liabilities was $141.7 Mil.
Long-Term Debt was $829.4 Mil.
Net Income was 14.009 + 9.905 + 25.285 + 6.77 = $56.0 Mil.
Non Operating Income was 1.332 + 2.497 + 0.581 + 1.023 = $5.4 Mil.
Cash Flow from Operations was 51.375 + 39.142 + 71.593 + 19.345 = $181.5 Mil.
|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 $48.4 Mil.
Total Current Liabilities was $160.2 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)|
|=||(65.64 / 592.344)||/||(52.755 / 637.201)|
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)|
|=||(294.036 / 637.201)||/||(282.463 / 592.344)|
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 - (161.872 + 2036.317) / 2450.926)||/||(1 - (204.856 + 1945.915) / 2407.579)|
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))|
|=||(86.319 / (86.319 + 1945.915))||/||(85.712 / (85.712 + 2036.317))|
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)|
|=||(-4.264 / 592.344)||/||(48.368 / 637.201)|
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)|
|=||((829.445 + 141.74) / 2450.926)||/||((803.126 + 160.165) / 2407.579)|
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|
|=||(55.969 - 5.433||-||181.455)||/||2450.926|
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 -2.31 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