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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 -1.65. The lowest was -3.23. And the median was -2.71.
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 * 0.8355||+||0.528 * 0.8718||+||0.404 * 1.002||+||0.892 * 1.0127||+||0.115 * 0.8114|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9966||+||4.679 * -0.0495||-||0.327 * 0.9622|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $792 Mil.|
Revenue was 2225 + 2447 + 2533 + 2443 = $9,648 Mil.
Gross Profit was 509 + 695 + 720 + 656 = $2,580 Mil.
Total Current Assets was $2,878 Mil.
Total Assets was $15,611 Mil.
Property, Plant and Equipment(Net PPE) was $5,130 Mil.
Depreciation, Depletion and Amortization(DDA) was $571 Mil.
Selling, General & Admin. Expense(SGA) was $762 Mil.
Total Current Liabilities was $2,056 Mil.
Long-Term Debt was $6,608 Mil.
Net Income was 124 + 256 + 297 + 171 = $848 Mil.
Non Operating Income was 10 + -13 + 0 + 11 = $8 Mil.
Cash Flow from Operations was 562 + 368 + 591 + 91 = $1,612 Mil.
|Accounts Receivable was $936 Mil.
Revenue was 2349 + 2413 + 2460 + 2305 = $9,527 Mil.
Gross Profit was 333 + 636 + 657 + 595 = $2,221 Mil.
Total Current Assets was $3,173 Mil.
Total Assets was $16,072 Mil.
Property, Plant and Equipment(Net PPE) was $5,087 Mil.
Depreciation, Depletion and Amortization(DDA) was $450 Mil.
Selling, General & Admin. Expense(SGA) was $755 Mil.
Total Current Liabilities was $2,022 Mil.
Long-Term Debt was $7,248 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)|
|=||(792 / 9648)||/||(936 / 9527)|
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)|
|=||(695 / 9527)||/||(509 / 9648)|
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 - (2878 + 5130) / 15611)||/||(1 - (3173 + 5087) / 16072)|
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))|
|=||(450 / (450 + 5087))||/||(571 / (571 + 5130))|
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)|
|=||(762 / 9648)||/||(755 / 9527)|
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)|
|=||((6608 + 2056) / 15611)||/||((7248 + 2022) / 16072)|
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|
|=||(848 - 8||-||1612)||/||15611|
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 -2.93 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