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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 -0.94. The lowest was -3.62. And the median was -2.72.
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 * 1.0101||+||0.528 * 0.9393||+||0.404 * 0.9903||+||0.892 * 0.9256||+||0.115 * 0.9838|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9968||+||4.679 * -0.045||-||0.327 * 0.9451|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $905 Mil.|
Revenue was 2287 + 2297 + 2236 + 2225 = $9,045 Mil.
Gross Profit was 621 + 605 + 634 + 509 = $2,369 Mil.
Total Current Assets was $2,900 Mil.
Total Assets was $15,489 Mil.
Property, Plant and Equipment(Net PPE) was $5,197 Mil.
Depreciation, Depletion and Amortization(DDA) was $578 Mil.
Selling, General & Admin. Expense(SGA) was $739 Mil.
Total Current Liabilities was $2,206 Mil.
Long-Term Debt was $5,933 Mil.
Net Income was 232 + 255 + 251 + 124 = $862 Mil.
Non Operating Income was -3 + 11 + -12 + 10 = $6 Mil.
Cash Flow from Operations was 450 + 494 + 47 + 562 = $1,553 Mil.
|Accounts Receivable was $968 Mil.
Revenue was 2447 + 2533 + 2443 + 2349 = $9,772 Mil.
Gross Profit was 695 + 720 + 656 + 333 = $2,404 Mil.
Total Current Assets was $3,182 Mil.
Total Assets was $15,880 Mil.
Property, Plant and Equipment(Net PPE) was $5,045 Mil.
Depreciation, Depletion and Amortization(DDA) was $551 Mil.
Selling, General & Admin. Expense(SGA) was $801 Mil.
Total Current Liabilities was $1,800 Mil.
Long-Term Debt was $7,029 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)|
|=||(905 / 9045)||/||(968 / 9772)|
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)|
|=||(2404 / 9772)||/||(2369 / 9045)|
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 - (2900 + 5197) / 15489)||/||(1 - (3182 + 5045) / 15880)|
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))|
|=||(551 / (551 + 5045))||/||(578 / (578 + 5197))|
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)|
|=||(739 / 9045)||/||(801 / 9772)|
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)|
|=||((5933 + 2206) / 15489)||/||((7029 + 1800) / 15880)|
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|
|=||(862 - 6||-||1553)||/||15489|
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 -2.77 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