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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 Esterline Technologies was -1.87. The lowest was -2.91. And the median was -2.43.
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 * 1.0644||+||0.528 * 1.077||+||0.404 * 0.9795||+||0.892 * 1.0181||+||0.115 * 0.927|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0187||+||4.679 * -0.0388||-||0.327 * 1.262|
|This Year (Apr15) TTM:||Last Year (Apr14) TTM:|
|Accounts Receivable was $385 Mil.|
Revenue was 500.08 + 446.344 + 485.491 + 531.124 = $1,963 Mil.
Gross Profit was 163.651 + 145.35 + 182.511 + 182.473 = $674 Mil.
Total Current Assets was $1,167 Mil.
Total Assets was $3,176 Mil.
Property, Plant and Equipment(Net PPE) was $307 Mil.
Depreciation, Depletion and Amortization(DDA) was $107 Mil.
Selling, General & Admin. Expense(SGA) was $364 Mil.
Total Current Liabilities was $408 Mil.
Long-Term Debt was $843 Mil.
Net Income was 19.81 + 8.319 + -3.472 + 38.908 = $64 Mil.
Non Operating Income was -0.329 + 0 + 0 + -0.533 = $-1 Mil.
Cash Flow from Operations was 50.482 + 5.196 + 81.649 + 50.263 = $188 Mil.
|Accounts Receivable was $355 Mil.
Revenue was 510.861 + 485.94 + 453.185 + 478.068 = $1,928 Mil.
Gross Profit was 179.225 + 170.735 + 184.086 + 178.902 = $713 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 $351 Mil.
Total Current Liabilities was $388 Mil.
Long-Term Debt was $649 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)|
|=||(384.662 / 1963.039)||/||(354.937 / 1928.054)|
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)|
|=||(145.35 / 1928.054)||/||(163.651 / 1963.039)|
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 - (1166.704 + 306.598) / 3176.368)||/||(1 - (1138.824 + 366.243) / 3325.414)|
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))|
|=||(115.126 / (115.126 + 366.243))||/||(106.598 / (106.598 + 306.598))|
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)|
|=||(363.981 / 1963.039)||/||(350.919 / 1928.054)|
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)|
|=||((842.954 + 407.592) / 3176.368)||/||((649.254 + 388.16) / 3325.414)|
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|
|=||(63.565 - -0.862||-||187.59)||/||3176.368|
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 -2.65 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