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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 -2.58.
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 * 0.9431||+||0.528 * 0.9993||+||0.404 * 0.9331||+||0.892 * 0.9493||+||0.115 * 0.9809|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0087||+||4.679 * -0.0133||-||0.327 * 1.115|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $4,272 Mil.|
Revenue was 5503 + 5400 + 5587 + 6807 = $23,297 Mil.
Gross Profit was 2234 + 2166 + 2280 + 2889 = $9,569 Mil.
Total Current Assets was $10,644 Mil.
Total Assets was $23,464 Mil.
Property, Plant and Equipment(Net PPE) was $3,610 Mil.
Depreciation, Depletion and Amortization(DDA) was $821 Mil.
Selling, General & Admin. Expense(SGA) was $5,452 Mil.
Total Current Liabilities was $8,312 Mil.
Long-Term Debt was $4,290 Mil.
Net Income was 564 + 973 + 525 + 410 = $2,472 Mil.
Non Operating Income was 0 + 849 + 0 + -901 = $-52 Mil.
Cash Flow from Operations was 499 + 358 + 571 + 1408 = $2,836 Mil.
|Accounts Receivable was $4,772 Mil.
Revenue was 6312 + 5812 + 5606 + 6812 = $24,542 Mil.
Gross Profit was 2638 + 2395 + 2236 + 2804 = $10,073 Mil.
Total Current Assets was $10,813 Mil.
Total Assets was $25,115 Mil.
Property, Plant and Equipment(Net PPE) was $3,737 Mil.
Depreciation, Depletion and Amortization(DDA) was $830 Mil.
Selling, General & Admin. Expense(SGA) was $5,694 Mil.
Total Current Liabilities was $8,533 Mil.
Long-Term Debt was $3,565 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)|
|=||(4272 / 23297)||/||(4772 / 24542)|
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)|
|=||(2166 / 24542)||/||(2234 / 23297)|
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 - (10644 + 3610) / 23464)||/||(1 - (10813 + 3737) / 25115)|
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))|
|=||(830 / (830 + 3737))||/||(821 / (821 + 3610))|
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)|
|=||(5452 / 23297)||/||(5694 / 24542)|
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)|
|=||((4290 + 8312) / 23464)||/||((3565 + 8533) / 25115)|
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|
|=||(2472 - -52||-||2836)||/||23464|
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 -2.71 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