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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 Corp was -1.86. The lowest was -2.84. 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 Corp 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 * 1.1399||+||0.528 * 1.0622||+||0.404 * 1.02||+||0.892 * 0.9585||+||0.115 * 1.1397|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1011||+||4.679 * -0.0366||-||0.327 * 1.1261|
|This Year (Mar16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $374 Mil.|
Revenue was 490.31 + 441.477 + 496.217 + 500.08 = $1,928 Mil.
Gross Profit was 156.173 + 137.719 + 169.796 + 163.651 = $627 Mil.
Total Current Assets was $1,114 Mil.
Total Assets was $3,012 Mil.
Property, Plant and Equipment(Net PPE) was $327 Mil.
Depreciation, Depletion and Amortization(DDA) was $101 Mil.
Selling, General & Admin. Expense(SGA) was $389 Mil.
Total Current Liabilities was $414 Mil.
Long-Term Debt was $864 Mil.
Net Income was 14.973 + 5.084 + 28.497 + 19.81 = $68 Mil.
Non Operating Income was 0 + 0 + 0 + -0.329 = $-0 Mil.
Cash Flow from Operations was 39.232 + 40.652 + 48.522 + 50.482 = $179 Mil.
|Accounts Receivable was $342 Mil.
Revenue was 446.344 + 548.059 + 506.309 + 510.861 = $2,012 Mil.
Gross Profit was 145.35 + 193.577 + 177.087 + 179.225 = $695 Mil.
Total Current Assets was $1,204 Mil.
Total Assets was $3,083 Mil.
Property, Plant and Equipment(Net PPE) was $303 Mil.
Depreciation, Depletion and Amortization(DDA) was $111 Mil.
Selling, General & Admin. Expense(SGA) was $369 Mil.
Total Current Liabilities was $379 Mil.
Long-Term Debt was $782 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)|
|=||(374.09 / 1928.084)||/||(342.399 / 2011.573)|
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)|
|=||(137.719 / 2011.573)||/||(156.173 / 1928.084)|
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 - (1113.86 + 327.364) / 3012.04)||/||(1 - (1203.699 + 303.18) / 3083.39)|
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))|
|=||(111.421 / (111.421 + 303.18))||/||(101.013 / (101.013 + 327.364))|
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)|
|=||(389.224 / 1928.084)||/||(368.783 / 2011.573)|
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)|
|=||((863.583 + 413.879) / 3012.04)||/||((782.041 + 379.283) / 3083.39)|
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|
|=||(68.364 - -0.329||-||178.888)||/||3012.04|
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 Corp has a M-score of -2.56 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 Corp Annual Data
Esterline Technologies Corp Quarterly Data