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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 Emerson Electric Co was -2.23. The lowest was -2.98. And the median was -2.57.
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 Emerson Electric 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 * 0.9981||+||0.528 * 1.03||+||0.404 * 0.9551||+||0.892 * 0.8741||+||0.115 * 0.9936|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0088||+||4.679 * 0.0856||-||0.327 * 1.1079|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $3,842 Mil.|
Revenue was 4713 + 5814 + 5503 + 5400 = $21,430 Mil.
Gross Profit was 1889 + 2368 + 2234 + 2166 = $8,657 Mil.
Total Current Assets was $9,694 Mil.
Total Assets was $21,552 Mil.
Property, Plant and Equipment(Net PPE) was $3,520 Mil.
Depreciation, Depletion and Amortization(DDA) was $810 Mil.
Selling, General & Admin. Expense(SGA) was $5,005 Mil.
Total Current Liabilities was $8,202 Mil.
Long-Term Debt was $4,043 Mil.
Net Income was 349 + 648 + 564 + 973 = $2,534 Mil.
Non Operating Income was -63 + -2542 + 0 + 849 = $-1,756 Mil.
Cash Flow from Operations was 487 + 1101 + 499 + 358 = $2,445 Mil.
|Accounts Receivable was $4,404 Mil.
Revenue was 5587 + 6807 + 6312 + 5812 = $24,518 Mil.
Gross Profit was 2280 + 2889 + 2638 + 2395 = $10,202 Mil.
Total Current Assets was $10,483 Mil.
Total Assets was $23,724 Mil.
Property, Plant and Equipment(Net PPE) was $3,631 Mil.
Depreciation, Depletion and Amortization(DDA) was $829 Mil.
Selling, General & Admin. Expense(SGA) was $5,676 Mil.
Total Current Liabilities was $8,877 Mil.
Long-Term Debt was $3,289 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)|
|=||(3842 / 21430)||/||(4404 / 24518)|
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)|
|=||(2368 / 24518)||/||(1889 / 21430)|
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 - (9694 + 3520) / 21552)||/||(1 - (10483 + 3631) / 23724)|
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))|
|=||(829 / (829 + 3631))||/||(810 / (810 + 3520))|
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)|
|=||(5005 / 21430)||/||(5676 / 24518)|
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)|
|=||((4043 + 8202) / 21552)||/||((3289 + 8877) / 23724)|
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|
|=||(2534 - -1756||-||2445)||/||21552|
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.
Emerson Electric Co has a M-score of -2.23 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
Emerson Electric Co Annual Data
Emerson Electric Co Quarterly Data