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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 -2.31. 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 * 0.9604||+||0.528 * 0.9839||+||0.404 * 0.9183||+||0.892 * 0.981||+||0.115 * 0.9759|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0075||+||4.679 * -0.0391||-||0.327 * 1.094|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $4,299 Mil.|
Revenue was 5400 + 5587 + 6807 + 6312 = $24,106 Mil.
Gross Profit was 2166 + 2280 + 2889 + 2638 = $9,973 Mil.
Total Current Assets was $10,344 Mil.
Total Assets was $22,968 Mil.
Property, Plant and Equipment(Net PPE) was $3,570 Mil.
Depreciation, Depletion and Amortization(DDA) was $824 Mil.
Selling, General & Admin. Expense(SGA) was $5,600 Mil.
Total Current Liabilities was $8,770 Mil.
Long-Term Debt was $3,272 Mil.
Net Income was 973 + 525 + 410 + 728 = $2,636 Mil.
Non Operating Income was 849 + 0 + -573 + -96 = $180 Mil.
Cash Flow from Operations was 358 + 571 + 1408 + 1018 = $3,355 Mil.
|Accounts Receivable was $4,563 Mil.
Revenue was 5812 + 5606 + 6812 + 6344 = $24,574 Mil.
Gross Profit was 2395 + 2236 + 2804 + 2568 = $10,003 Mil.
Total Current Assets was $10,203 Mil.
Total Assets was $24,346 Mil.
Property, Plant and Equipment(Net PPE) was $3,692 Mil.
Depreciation, Depletion and Amortization(DDA) was $827 Mil.
Selling, General & Admin. Expense(SGA) was $5,666 Mil.
Total Current Liabilities was $7,832 Mil.
Long-Term Debt was $3,836 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)|
|=||(4299 / 24106)||/||(4563 / 24574)|
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)|
|=||(2280 / 24574)||/||(2166 / 24106)|
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 - (10344 + 3570) / 22968)||/||(1 - (10203 + 3692) / 24346)|
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))|
|=||(827 / (827 + 3692))||/||(824 / (824 + 3570))|
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)|
|=||(5600 / 24106)||/||(5666 / 24574)|
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)|
|=||((3272 + 8770) / 22968)||/||((3836 + 7832) / 24346)|
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|
|=||(2636 - 180||-||3355)||/||22968|
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 -2.79 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