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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 -2.48.
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 * 0.9371||+||0.528 * 0.9893||+||0.404 * 0.96||+||0.892 * 1.1352||+||0.115 * 0.9597|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0067||+||4.679 * -0.0202||-||0.327 * 0.9635|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $364 Mil.|
Revenue was 457.733 + 543.752 + 517.092 + 490.31 = $2,009 Mil.
Gross Profit was 144.047 + 193.769 + 173.584 + 156.173 = $668 Mil.
Total Current Assets was $1,140 Mil.
Total Assets was $2,928 Mil.
Property, Plant and Equipment(Net PPE) was $331 Mil.
Depreciation, Depletion and Amortization(DDA) was $102 Mil.
Selling, General & Admin. Expense(SGA) was $397 Mil.
Total Current Liabilities was $367 Mil.
Long-Term Debt was $821 Mil.
Net Income was 16.189 + 52.272 + 29.356 + 14.973 = $113 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 45.535 + 48.546 + 38.728 + 39.232 = $172 Mil.
|Accounts Receivable was $342 Mil.
Revenue was 441.477 + 331.808 + 496.217 + 500.08 = $1,770 Mil.
Gross Profit was 137.719 + 110.596 + 169.796 + 163.651 = $582 Mil.
Total Current Assets was $1,099 Mil.
Total Assets was $2,919 Mil.
Property, Plant and Equipment(Net PPE) was $308 Mil.
Depreciation, Depletion and Amortization(DDA) was $90 Mil.
Selling, General & Admin. Expense(SGA) was $347 Mil.
Total Current Liabilities was $399 Mil.
Long-Term Debt was $831 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)|
|=||(363.825 / 2008.887)||/||(342.008 / 1769.582)|
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)|
|=||(581.762 / 1769.582)||/||(667.573 / 2008.887)|
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 - (1140.408 + 330.565) / 2927.8)||/||(1 - (1098.528 + 307.586) / 2919.322)|
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))|
|=||(89.713 / (89.713 + 307.586))||/||(101.712 / (101.712 + 330.565))|
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)|
|=||(396.816 / 2008.887)||/||(347.216 / 1769.582)|
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)|
|=||((821.441 + 367.199) / 2927.8)||/||((831.358 + 398.737) / 2919.322)|
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|
|=||(112.79 - 0||-||172.041)||/||2927.8|
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 -2.53 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 Corp Annual Data
Esterline Technologies Corp Quarterly Data