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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 -2.53 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 -2.91. And the median was -2.42.
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 * 0.97||+||0.528 * 0.9944||+||0.404 * 0.9769||+||0.892 * 1.0189||+||0.115 * 0.9916|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9864||+||4.679 * -0.0133||-||0.327 * 0.8911|
|This Year (Jan14) TTM:||Last Year (Jan13) TTM:|
|Accounts Receivable was $334 Mil.|
Revenue was 504.98 + 534.162 + 478.068 + 499.562 = $2,017 Mil.
Gross Profit was 173.295 + 205.373 + 178.902 + 181.376 = $739 Mil.
Total Current Assets was $1,096 Mil.
Total Assets was $3,270 Mil.
Property, Plant and Equipment(Net PPE) was $366 Mil.
Depreciation, Depletion and Amortization(DDA) was $114 Mil.
Selling, General & Admin. Expense(SGA) was $389 Mil.
Total Current Liabilities was $384 Mil.
Long-Term Debt was $685 Mil.
Net Income was 30.078 + 65.863 + 38.238 + 35.522 = $170 Mil.
Non Operating Income was 0 + 0 + 0 + -0.946 = $-1 Mil.
Cash Flow from Operations was 49.923 + 54.493 + 73.595 + 36.088 = $214 Mil.
|Accounts Receivable was $338 Mil.
Revenue was 457.962 + 530.656 + 485.949 + 504.831 = $1,979 Mil.
Gross Profit was 160.345 + 204.253 + 172.096 + 184.523 = $721 Mil.
Total Current Assets was $1,048 Mil.
Total Assets was $3,235 Mil.
Property, Plant and Equipment(Net PPE) was $357 Mil.
Depreciation, Depletion and Amortization(DDA) was $110 Mil.
Selling, General & Admin. Expense(SGA) was $387 Mil.
Total Current Liabilities was $383 Mil.
Long-Term Debt was $803 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)|
|=||(333.894 / 2016.772)||/||(337.851 / 1979.398)|
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)|
|=||(205.373 / 1979.398)||/||(173.295 / 2016.772)|
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 - (1096.351 + 366.454) / 3270.335)||/||(1 - (1047.99 + 356.973) / 3235.404)|
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))|
|=||(109.64 / (109.64 + 356.973))||/||(113.8 / (113.8 + 366.454))|
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)|
|=||(388.742 / 2016.772)||/||(386.801 / 1979.398)|
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)|
|=||((685.245 + 383.549) / 3270.335)||/||((803.329 + 383.31) / 3235.404)|
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|
|=||(169.701 - -0.946||-||214.099)||/||3270.335|
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 -2.53 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