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Eastman Chemical Co (NYSE:EMN)
Beneish M-Score
-2.65 (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 -2.65 suggests that the company is not a manipulator.

EMN' s 10-Year Beneish M-Score Range
Min: -3.63   Max: -1.04
Current: -2.65

-3.63
-1.04

During the past 13 years, the highest Beneish M-Score of Eastman Chemical Co was -1.04. The lowest was -3.63. And the median was -2.70.


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 * 0.9982+0.528 * 0.8777+0.404 * 0.9969+0.892 * 1.0204+0.115 * 1.0269
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8625+4.679 * -0.0318-0.327 * 1.0015
=-2.65

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $985 Mil.
Revenue was 2413 + 2460 + 2305 + 2265 = $9,443 Mil.
Gross Profit was 636 + 657 + 595 + 794 = $2,682 Mil.
Total Current Assets was $2,890 Mil.
Total Assets was $12,135 Mil.
Property, Plant and Equipment(Net PPE) was $4,352 Mil.
Depreciation, Depletion and Amortization(DDA) was $435 Mil.
Selling, General & Admin. Expense(SGA) was $646 Mil.
Total Current Liabilities was $1,398 Mil.
Long-Term Debt was $4,563 Mil.
Net Income was 210 + 292 + 233 + 346 = $1,081 Mil.
Non Operating Income was 5 + 8 + 3 + -1 = $15 Mil.
Cash Flow from Operations was 560 + 419 + -30 + 503 = $1,452 Mil.
Accounts Receivable was $967 Mil.
Revenue was 2338 + 2440 + 2307 + 2169 = $9,254 Mil.
Gross Profit was 689 + 677 + 616 + 325 = $2,307 Mil.
Total Current Assets was $2,767 Mil.
Total Assets was $11,727 Mil.
Property, Plant and Equipment(Net PPE) was $4,217 Mil.
Depreciation, Depletion and Amortization(DDA) was $434 Mil.
Selling, General & Admin. Expense(SGA) was $734 Mil.
Total Current Liabilities was $1,323 Mil.
Long-Term Debt was $4,429 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)
=(985 / 9443) / (967 / 9254)
=0.10431007 / 0.10449535
=0.9982

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)
=(657 / 9254) / (636 / 9443)
=0.2492976 / 0.28401991
=0.8777

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 - (2890 + 4352) / 12135) / (1 - (2767 + 4217) / 11727)
=0.40321384 / 0.40445127
=0.9969

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
=9443 / 9254
=1.0204

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))
=(434 / (434 + 4217)) / (435 / (435 + 4352))
=0.09331327 / 0.09087111
=1.0269

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)
=(646 / 9443) / (734 / 9254)
=0.06841046 / 0.07931705
=0.8625

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)
=((4563 + 1398) / 12135) / ((4429 + 1323) / 11727)
=0.49122373 / 0.49049203
=1.0015

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
=(1081 - 15 - 1452) / 12135
=-0.0318

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 -2.65 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 0.9690.86771.13030.79460.51151.34241.69980.94381.18590.9013
GMI 0.93960.7061.12821.06921.04250.80240.82691.10431.05060.7325
AQI 1.15330.79050.87841.3850.86320.97210.99011.04193.32660.9548
SGI 1.13450.98181.04941.00750.98480.75041.15751.22871.12871.154
DEPI 1.05791.04470.96170.8851.33740.95171.01180.99081.01880.8647
SGAI 0.95810.99370.91820.98551.0131.26910.93320.88561.21650.8679
LVGI 0.94760.85520.9331.02390.97381.01231.02250.92841.27760.914
TATA -0.0574-0.0527-0.03-0.0562-0.0543-0.1104-0.00170.0084-0.0588-0.0109
M-score -2.60-3.05-2.41-2.75-3.18-3.08-1.79-2.17-1.63-2.61

Eastman Chemical Co Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.87321.21241.18591.1281.13030.83860.90130.92610.99610.9982
GMI 1.09871.04761.05060.99780.98350.92270.73250.76930.80.8777
AQI 0.83223.34623.32663.21194.3160.96930.95480.9580.99390.9969
SGI 1.09011.10671.12871.1861.27271.20871.1541.08851.0211.0204
DEPI 1.06051.12831.01880.91270.85820.77580.86470.96861.0491.0269
SGAI 0.94481.03631.21651.20531.21931.12660.86790.8560.83010.8625
LVGI 1.27951.271.27761.31770.92220.90250.9140.94960.97061.0015
TATA -0.0329-0.0374-0.0588-0.0498-0.048-0.0409-0.0111-0.0094-0.0122-0.0318
M-score -2.76-1.47-1.63-1.69-1.04-2.70-2.61-2.61-2.59-2.65
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