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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.
Eastman Chemical Company has a M-score of -2.57 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Eastman Chemical Company was -1.59. The lowest was -3.15. 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 Company 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 * 0.9456||+||0.528 * 0.7325||+||0.404 * 0.9651||+||0.892 * 1.154||+||0.115 * 0.8647|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8679||+||4.679 * -0.0111||-||0.327 * 0.9212|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $1,088 Mil.|
Revenue was 2265 + 2338 + 2440 + 2307 = $9,350 Mil.
Gross Profit was 794 + 689 + 677 + 616 = $2,776 Mil.
Total Current Assets was $2,840 Mil.
Total Assets was $11,845 Mil.
Property, Plant and Equipment(Net PPE) was $4,290 Mil.
Depreciation, Depletion and Amortization(DDA) was $433 Mil.
Selling, General & Admin. Expense(SGA) was $645 Mil.
Total Current Liabilities was $1,470 Mil.
Long-Term Debt was $4,254 Mil.
Net Income was 346 + 308 + 264 + 247 = $1,165 Mil.
Non Operating Income was -1 + -1 + 0 + 1 = $-1 Mil.
Cash Flow from Operations was 503 + 427 + 362 + 5 = $1,297 Mil.
|Accounts Receivable was $997 Mil.
Revenue was 2169 + 2259 + 1853 + 1821 = $8,102 Mil.
Gross Profit was 325 + 525 + 481 + 431 = $1,762 Mil.
Total Current Assets was $2,699 Mil.
Total Assets was $11,710 Mil.
Property, Plant and Equipment(Net PPE) was $4,181 Mil.
Depreciation, Depletion and Amortization(DDA) was $360 Mil.
Selling, General & Admin. Expense(SGA) was $644 Mil.
Total Current Liabilities was $1,364 Mil.
Long-Term Debt was $4,779 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)|
|=||(1088 / 9350)||/||(997 / 8102)|
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)|
|=||(689 / 8102)||/||(794 / 9350)|
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 - (2840 + 4290) / 11845)||/||(1 - (2699 + 4181) / 11710)|
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))|
|=||(360 / (360 + 4181))||/||(433 / (433 + 4290))|
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)|
|=||(645 / 9350)||/||(644 / 8102)|
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)|
|=||((4254 + 1470) / 11845)||/||((4779 + 1364) / 11710)|
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|
|=||(1165 - -1||-||1297)||/||11845|
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 Company has a M-score of -2.57 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 Company Annual Data
Eastman Chemical Company Quarterly Data