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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 -2.69.
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 * 1.0981||+||0.528 * 1.025||+||0.404 * 0.9737||+||0.892 * 0.9337||+||0.115 * 1.0112|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9817||+||4.679 * -0.0292||-||0.327 * 0.9464|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $812 Mil.|
Revenue was 2188 + 2287 + 2297 + 2236 = $9,008 Mil.
Gross Profit was 490 + 621 + 605 + 634 = $2,350 Mil.
Total Current Assets was $2,866 Mil.
Total Assets was $15,457 Mil.
Property, Plant and Equipment(Net PPE) was $5,276 Mil.
Depreciation, Depletion and Amortization(DDA) was $580 Mil.
Selling, General & Admin. Expense(SGA) was $703 Mil.
Total Current Liabilities was $1,795 Mil.
Long-Term Debt was $6,311 Mil.
Net Income was 116 + 232 + 255 + 251 = $854 Mil.
Non Operating Income was -75 + -3 + 11 + -12 = $-79 Mil.
Cash Flow from Operations was 394 + 450 + 494 + 47 = $1,385 Mil.
|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 $15,580 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 $767 Mil.
Total Current Liabilities was $2,056 Mil.
Long-Term Debt was $6,577 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)|
|=||(812 / 9008)||/||(792 / 9648)|
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)|
|=||(2580 / 9648)||/||(2350 / 9008)|
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 - (2866 + 5276) / 15457)||/||(1 - (2878 + 5130) / 15580)|
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))|
|=||(571 / (571 + 5130))||/||(580 / (580 + 5276))|
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)|
|=||(703 / 9008)||/||(767 / 9648)|
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)|
|=||((6311 + 1795) / 15457)||/||((6577 + 2056) / 15580)|
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|
|=||(854 - -79||-||1385)||/||15457|
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 -2.56 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