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Eastman Chemical Co (NYSE:EMN)
Beneish M-Score
-2.60 (As of Today)

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.

Eastman Chemical Co has a M-score of -2.60 suggests that the company is not a manipulator.

EMN' s 10-Year Beneish M-Score Range
Min: -3.55   Max: -0.97
Current: -2.6

-3.55
-0.97

During the past 13 years, the highest Beneish M-Score of Eastman Chemical Co was -0.97. The lowest was -3.55. And the median was -2.68.


Definition

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 * 0.9794+0.528 * 0.8+0.404 * 0.9939+0.892 * 1.021+0.115 * 1.049
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8301+4.679 * -0.0122-0.327 * 0.9706
=-2.60

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $1,226 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.
Net Income was 292 + 233 + 346 + 308 = $1,179 Mil.
Non Operating Income was 8 + 3 + -1 + -1 = $9 Mil.
Cash Flow from Operations was 419 + -30 + 503 + 427 = $1,319 Mil.
Accounts Receivable was $1,226 Mil.
Revenue was 2440 + 2307 + 2169 + 2259 = $9,175 Mil.
Gross Profit was 677 + 616 + 325 + 525 = $2,143 Mil.
Total Current Assets was $2,838 Mil.
Total Assets was $11,762 Mil.
Property, Plant and Equipment(Net PPE) was $4,177 Mil.
Depreciation, Depletion and Amortization(DDA) was $438 Mil.
Selling, General & Admin. Expense(SGA) was $748 Mil.
Total Current Liabilities was $1,309 Mil.
Long-Term Debt was $4,679 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(1226 / 9368) / (1226 / 9175)
=0.13087105 / 0.13362398
=0.9794

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(595 / 9175) / (657 / 9368)
=0.23356948 / 0.29195132
=0.8

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (2986 + 4343) / 12238) / (1 - (2838 + 4177) / 11762)
=0.40112764 / 0.40358783
=0.9939

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=9368 / 9175
=1.021

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))
=(438 / (438 + 4177)) / (432 / (432 + 4343))
=0.09490791 / 0.0904712
=1.049

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)
=(634 / 9368) / (748 / 9175)
=0.0676772 / 0.08152589
=0.8301

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)
=((4773 + 1274) / 12238) / ((4679 + 1309) / 11762)
=0.49411669 / 0.50909709
=0.9706

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(1179 - 9 - 1319) / 12238
=-0.0122

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 -2.60 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Eastman Chemical Co Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.97950.7851.08910.95190.54631.42681.54090.84761.25470.9456
GMI 0.93960.74731.16040.98221.04250.80240.82691.10431.05060.7325
AQI 1.2080.76620.92841.31050.86320.97210.99011.04193.32660.9548
SGI 1.13451.07281.05540.91680.98480.75041.15751.22871.12871.154
DEPI 1.05791.04470.96170.8851.33740.95171.01180.99081.01880.8647
SGAI 0.95810.94040.9121.04831.0131.26910.93320.88561.21650.8679
LVGI 0.94020.86010.92681.03080.97381.01231.02250.92841.27760.914
TATA -0.0571-0.0532-0.0296-0.0562-0.0487-0.1104-0.00170.0084-0.0588-0.0109
M-score -2.56-3.03-2.40-2.78-3.13-3.00-1.94-2.26-1.57-2.57

Eastman Chemical Co Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.75850.77991.0911.25471.2231.20110.8860.94560.91480.9794
GMI 1.16161.15561.12151.05060.99780.98350.92270.73250.76930.8
AQI 1.11430.83223.34623.32663.21194.3160.96930.95480.9580.9939
SGI 1.19961.16331.21911.12871.1861.27271.20871.1541.08851.021
DEPI 1.09711.06051.12831.01880.91270.85820.77580.86470.96861.049
SGAI 0.91110.91260.98691.21651.20531.21931.12660.86790.8560.8301
LVGI 0.89371.27951.271.27761.31770.92220.90250.9140.94960.9706
TATA -0.0271-0.0329-0.0374-0.0588-0.0498-0.048-0.0409-0.0111-0.0094-0.0122
M-score -2.46-2.75-1.44-1.57-1.60-0.97-2.66-2.57-2.62-2.60
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