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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 -2.59.
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 * 1.0636||+||0.528 * 1.013||+||0.404 * 0.9623||+||0.892 * 0.8834||+||0.115 * 1.0101|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0032||+||4.679 * -0.0361||-||0.327 * 1.0445|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $4,014 Mil.|
Revenue was 5126 + 4928 + 4713 + 5814 = $20,581 Mil.
Gross Profit was 2094 + 1994 + 1889 + 2368 = $8,345 Mil.
Total Current Assets was $10,220 Mil.
Total Assets was $22,082 Mil.
Property, Plant and Equipment(Net PPE) was $3,521 Mil.
Depreciation, Depletion and Amortization(DDA) was $791 Mil.
Selling, General & Admin. Expense(SGA) was $4,832 Mil.
Total Current Liabilities was $8,326 Mil.
Long-Term Debt was $4,062 Mil.
Net Income was 479 + 369 + 349 + 648 = $1,845 Mil.
Non Operating Income was -102 + -76 + -63 + -142 = $-383 Mil.
Cash Flow from Operations was 718 + 719 + 487 + 1101 = $3,025 Mil.
|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.
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)|
|=||(4014 / 20581)||/||(4272 / 23297)|
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)|
|=||(9569 / 23297)||/||(8345 / 20581)|
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 - (10220 + 3521) / 22082)||/||(1 - (10644 + 3610) / 23464)|
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))|
|=||(821 / (821 + 3610))||/||(791 / (791 + 3521))|
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)|
|=||(4832 / 20581)||/||(5452 / 23297)|
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)|
|=||((4062 + 8326) / 22082)||/||((4290 + 8312) / 23464)|
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|
|=||(1845 - -383||-||3025)||/||22082|
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 -2.72 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