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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 Eastman Chemical Co was -0.95. The lowest was -3.62. And the median was -2.70.
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 Eastman Chemical 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 * 0.9171||+||0.528 * 1.2124||+||0.404 * 1.2096||+||0.892 * 1.0395||+||0.115 * 0.9623|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1972||+||4.679 * -0.0643||-||0.327 * 1.1329|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $1,021 Mil.|
Revenue was 2533 + 2443 + 2349 + 2413 = $9,738 Mil.
Gross Profit was 720 + 656 + 333 + 636 = $2,345 Mil.
Total Current Assets was $3,167 Mil.
Total Assets was $15,886 Mil.
Property, Plant and Equipment(Net PPE) was $5,011 Mil.
Depreciation, Depletion and Amortization(DDA) was $520 Mil.
Selling, General & Admin. Expense(SGA) was $789 Mil.
Total Current Liabilities was $1,821 Mil.
Long-Term Debt was $7,072 Mil.
Net Income was 297 + 171 + 16 + 210 = $694 Mil.
Non Operating Income was 0 + 11 + -1 + 5 = $15 Mil.
Cash Flow from Operations was 591 + 91 + 459 + 560 = $1,701 Mil.
|Accounts Receivable was $1,071 Mil.
Revenue was 2460 + 2305 + 2265 + 2338 = $9,368 Mil.
Gross Profit was 657 + 595 + 794 + 689 = $2,735 Mil.
Total Current Assets was $2,986 Mil.
Total Assets was $12,238 Mil.
Property, Plant and Equipment(Net PPE) was $4,343 Mil.
Depreciation, Depletion and Amortization(DDA) was $432 Mil.
Selling, General & Admin. Expense(SGA) was $634 Mil.
Total Current Liabilities was $1,274 Mil.
Long-Term Debt was $4,773 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)|
|=||(1021 / 9738)||/||(1071 / 9368)|
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)|
|=||(656 / 9368)||/||(720 / 9738)|
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 - (3167 + 5011) / 15886)||/||(1 - (2986 + 4343) / 12238)|
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))|
|=||(432 / (432 + 4343))||/||(520 / (520 + 5011))|
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)|
|=||(789 / 9738)||/||(634 / 9368)|
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)|
|=||((7072 + 1821) / 15886)||/||((4773 + 1274) / 12238)|
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|
|=||(694 - 15||-||1701)||/||15886|
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.
Eastman Chemical Co has a M-score of -2.71 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
Eastman Chemical Co Annual Data
Eastman Chemical Co Quarterly Data