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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.
Esterline Technologies has a M-score of -2.47 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Esterline Technologies was -1.87. The lowest was -2.89. And the median was -2.45.
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 Esterline Technologies 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 * 1.0053||+||0.528 * 1.0062||+||0.404 * 0.9629||+||0.892 * 1.0368||+||0.115 * 0.9912|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9715||+||4.679 * -0.0125||-||0.327 * 0.8741|
|This Year (Apr14) TTM:||Last Year (Apr13) TTM:|
|Accounts Receivable was $362 Mil.|
Revenue was 529.574 + 504.98 + 534.162 + 478.068 = $2,047 Mil.
Gross Profit was 182.345 + 173.295 + 205.373 + 178.902 = $740 Mil.
Total Current Assets was $1,139 Mil.
Total Assets was $3,325 Mil.
Property, Plant and Equipment(Net PPE) was $366 Mil.
Depreciation, Depletion and Amortization(DDA) was $115 Mil.
Selling, General & Admin. Expense(SGA) was $389 Mil.
Total Current Liabilities was $388 Mil.
Long-Term Debt was $649 Mil.
Net Income was 36.904 + 30.078 + 65.863 + 38.238 = $171 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 34.529 + 49.923 + 54.493 + 73.595 = $213 Mil.
|Accounts Receivable was $348 Mil.
Revenue was 499.562 + 457.962 + 530.656 + 485.949 = $1,974 Mil.
Gross Profit was 181.376 + 160.345 + 204.253 + 172.096 = $718 Mil.
Total Current Assets was $1,024 Mil.
Total Assets was $3,188 Mil.
Property, Plant and Equipment(Net PPE) was $352 Mil.
Depreciation, Depletion and Amortization(DDA) was $109 Mil.
Selling, General & Admin. Expense(SGA) was $386 Mil.
Total Current Liabilities was $379 Mil.
Long-Term Debt was $759 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)|
|=||(362.418 / 2046.784)||/||(347.718 / 1974.129)|
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)|
|=||(173.295 / 1974.129)||/||(182.345 / 2046.784)|
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 - (1138.824 + 366.243) / 3325.414)||/||(1 - (1023.843 + 351.561) / 3187.586)|
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))|
|=||(109.232 / (109.232 + 351.561))||/||(115.126 / (115.126 + 366.243))|
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)|
|=||(388.934 / 2046.784)||/||(386.129 / 1974.129)|
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)|
|=||((649.254 + 388.16) / 3325.414)||/||((758.586 + 379.002) / 3187.586)|
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|
|=||(171.083 - 0||-||212.54)||/||3325.414|
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.
Esterline Technologies has a M-score of -2.47 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
Esterline Technologies Annual Data
Esterline Technologies Quarterly Data