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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 -2.87. And the median was -2.46.
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 * 0.9118||+||0.528 * 1.062||+||0.404 * 0.9678||+||0.892 * 1.086||+||0.115 * 0.8705|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9148||+||4.679 * -0.0355||-||0.327 * 0.9663|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $380 Mil.|
Revenue was 485.491 + 531.124 + 529.574 + 504.98 = $2,051 Mil.
Gross Profit was 182.511 + 182.473 + 182.345 + 173.295 = $721 Mil.
Total Current Assets was $1,170 Mil.
Total Assets was $3,193 Mil.
Property, Plant and Equipment(Net PPE) was $319 Mil.
Depreciation, Depletion and Amortization(DDA) was $116 Mil.
Selling, General & Admin. Expense(SGA) was $364 Mil.
Total Current Liabilities was $408 Mil.
Long-Term Debt was $610 Mil.
Net Income was -3.472 + 38.908 + 36.904 + 30.078 = $102 Mil.
Non Operating Income was 0 + -0.533 + 0 + 0 = $-1 Mil.
Cash Flow from Operations was 81.649 + 50.263 + 34.529 + 49.923 = $216 Mil.
|Accounts Receivable was $384 Mil.
Revenue was 453.185 + 478.068 + 499.562 + 457.962 = $1,889 Mil.
Gross Profit was 184.086 + 178.902 + 181.376 + 160.345 = $705 Mil.
Total Current Assets was $1,092 Mil.
Total Assets was $3,262 Mil.
Property, Plant and Equipment(Net PPE) was $371 Mil.
Depreciation, Depletion and Amortization(DDA) was $112 Mil.
Selling, General & Admin. Expense(SGA) was $367 Mil.
Total Current Liabilities was $408 Mil.
Long-Term Debt was $668 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)|
|=||(379.889 / 2051.169)||/||(383.666 / 1888.777)|
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)|
|=||(182.473 / 1888.777)||/||(182.511 / 2051.169)|
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 - (1169.504 + 319.342) / 3193.467)||/||(1 - (1091.715 + 371.197) / 3262.112)|
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))|
|=||(112.132 / (112.132 + 371.197))||/||(116.027 / (116.027 + 319.342))|
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)|
|=||(364.259 / 2051.169)||/||(366.641 / 1888.777)|
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)|
|=||((609.72 + 408.129) / 3193.467)||/||((667.859 + 408.092) / 3262.112)|
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|
|=||(102.418 - -0.533||-||216.364)||/||3193.467|
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 -2.62 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