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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 -3.16. And the median was -2.61.
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 * 0.6787||+||0.528 * 0.9959||+||0.404 * 0.8482||+||0.892 * 0.9304||+||0.115 * 0.7651|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0249||+||4.679 * -0.0498||-||0.327 * 0.802|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $2,426 Mil.|
Revenue was 3216 + -245 + 5126 + 4928 = $13,025 Mil.
Gross Profit was 1365 + 285 + 2094 + 1994 = $5,738 Mil.
Total Current Assets was $8,877 Mil.
Total Assets was $17,471 Mil.
Property, Plant and Equipment(Net PPE) was $2,861 Mil.
Depreciation, Depletion and Amortization(DDA) was $567 Mil.
Selling, General & Admin. Expense(SGA) was $3,060 Mil.
Total Current Liabilities was $4,146 Mil.
Long-Term Debt was $3,815 Mil.
Net Income was 309 + 438 + 479 + 369 = $1,595 Mil.
Non Operating Income was -33 + 44 + -102 + -76 = $-167 Mil.
Cash Flow from Operations was 238 + 957 + 718 + 719 = $2,632 Mil.
|Accounts Receivable was $3,842 Mil.
Revenue was 3337 + -241 + 5503 + 5400 = $13,999 Mil.
Gross Profit was 1414 + 328 + 2234 + 2166 = $6,142 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 $510 Mil.
Selling, General & Admin. Expense(SGA) was $3,209 Mil.
Total Current Liabilities was $8,202 Mil.
Long-Term Debt was $4,043 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)|
|=||(2426 / 13025)||/||(3842 / 13999)|
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)|
|=||(6142 / 13999)||/||(5738 / 13025)|
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 - (8877 + 2861) / 17471)||/||(1 - (9694 + 3520) / 21552)|
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))|
|=||(510 / (510 + 3520))||/||(567 / (567 + 2861))|
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)|
|=||(3060 / 13025)||/||(3209 / 13999)|
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)|
|=||((3815 + 4146) / 17471)||/||((4043 + 8202) / 21552)|
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|
|=||(1595 - -167||-||2632)||/||17471|
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 -3.10 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