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Eastman Chemical Company (NYSE:EMN)
Beneish M-Score
-2.57 (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 Company has a M-score of -2.57 suggests that the company is not a manipulator.

EMN' s 10-Year Beneish M-Score Range
Min: -3.15   Max: -1.59
Current: -2.57

-3.15
-1.59

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.


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 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
=-2.57

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

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

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)
=(1088 / 9350) / (997 / 8102)
=0.11636364 / 0.12305604
=0.9456

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)
=(689 / 8102) / (794 / 9350)
=0.21747717 / 0.2968984
=0.7325

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 - (2840 + 4290) / 11845) / (1 - (2699 + 4181) / 11710)
=0.39805825 / 0.41246798
=0.9651

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
=9350 / 8102
=1.154

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))
=0.07927769 / 0.09167902
=0.8647

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)
=0.06898396 / 0.07948655
=0.8679

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)
=0.48324187 / 0.52459436
=0.9212

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
=(1165 - -1 - 1297) / 11845
=-0.0111

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.


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 Company Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.97950.85771.09530.86620.54631.63811.34220.84761.25470.9456
GMI 0.93960.7061.12821.06921.04250.71310.941.14251.00510.7325
AQI 1.15330.79050.87841.3850.86320.97210.99011.04193.29120.9651
SGI 1.13450.98181.04941.00750.98480.65361.32891.22871.12871.154
DEPI 1.05791.04470.96170.8851.33740.95171.01180.99081.01880.8647
SGAI 0.95810.99370.91820.98551.0131.34010.88990.9021.18620.8679
LVGI 0.94760.85520.9331.02390.97381.01231.02250.92841.26770.9212
TATA -0.0574-0.0527-0.03-0.0562-0.0543-0.1104-0.00420.0002-0.0583-0.0109
M-score -2.59-3.06-2.44-2.69-3.15-2.95-1.91-2.28-1.59-2.57

Eastman Chemical Company Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.7680.84760.78290.83221.20181.25471.2231.20110.8860.9456
GMI 1.11651.14251.2061.18941.14711.00510.93930.91990.85980.7325
AQI 1.03441.04191.11430.83223.34623.29123.21194.3160.96930.9651
SGI 1.36831.22871.16231.09011.10671.12871.1861.27271.20871.154
DEPI 1.00450.99081.09711.06051.12831.01880.91270.85820.77580.8647
SGAI 0.88580.9020.96050.99461.09491.18621.16421.17081.08240.8679
LVGI 1.00830.92840.89371.27951.271.26771.31770.92220.90250.9212
TATA 0.03060.0002-0.0384-0.0445-0.0468-0.0577-0.0493-0.0458-0.0385-0.0111
M-score -2.13-2.28-2.51-2.81-1.48-1.59-1.62-0.99-2.67-2.57
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