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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 -2.66.
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 * 1.0439||+||0.528 * 1.2735||+||0.404 * 1.2211||+||0.892 * 1.0189||+||0.115 * 1.1281|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1488||+||4.679 * -0.0418||-||0.327 * 1.1936|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|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.
Net Income was 16 + 210 + 292 + 233 = $751 Mil.
Non Operating Income was -1 + 5 + 8 + 3 = $15 Mil.
Cash Flow from Operations was 459 + 560 + 419 + -30 = $1,408 Mil.
|Accounts Receivable was $880 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.
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)|
|=||(936 / 9527)||/||(880 / 9350)|
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)|
|=||(636 / 9350)||/||(333 / 9527)|
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 - (3173 + 5087) / 16072)||/||(1 - (2840 + 4290) / 11845)|
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))|
|=||(433 / (433 + 4290))||/||(450 / (450 + 5087))|
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)|
|=||(755 / 9527)||/||(645 / 9350)|
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)|
|=||((7248 + 2022) / 16072)||/||((4254 + 1470) / 11845)|
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|
|=||(751 - 15||-||1408)||/||16072|
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 -2.46 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