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E*TRADE Financial Corp (NAS:ETFC)
Beneish M-Score
-2.47 (As of Today)

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.

E*TRADE Financial Corp has a M-score of -2.47 suggests that the company is not a manipulator.

ETFC' s Beneish M-Score Range Over the Past 10 Years
Min: -3.38   Max: 599.49
Current: -2.47

-3.38
599.49

During the past 13 years, the highest Beneish M-Score of E*TRADE Financial Corp was 599.49. The lowest was -3.38. And the median was -2.30.


Definition

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 E*TRADE Financial 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 * 1.0968+0.528 * 1+0.404 * 1.0004+0.892 * 0.842+0.115 * 1.1535
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2415+4.679 * -0.0111-0.327 * 0.5757
=-2.47

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun16) TTM:Last Year (Jun15) TTM:
Accounts Receivable was $7,516 Mil.
Revenue was 474 + 472 + 439 + 59 = $1,444 Mil.
Gross Profit was 474 + 472 + 439 + 59 = $1,444 Mil.
Total Current Assets was $0 Mil.
Total Assets was $49,202 Mil.
Property, Plant and Equipment(Net PPE) was $231 Mil.
Depreciation, Depletion and Amortization(DDA) was $251 Mil.
Selling, General & Admin. Expense(SGA) was $831 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt was $1,402 Mil.
Net Income was 133 + 153 + 89 + -153 = $222 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 231 + 96 + 164 + 279 = $770 Mil.
Accounts Receivable was $8,139 Mil.
Revenue was 429 + 441 + 434 + 411 = $1,715 Mil.
Gross Profit was 429 + 441 + 434 + 411 = $1,715 Mil.
Total Current Assets was $0 Mil.
Total Assets was $47,115 Mil.
Property, Plant and Equipment(Net PPE) was $238 Mil.
Depreciation, Depletion and Amortization(DDA) was $358 Mil.
Selling, General & Admin. Expense(SGA) was $795 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt was $2,332 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(7516 / 1444) / (8139 / 1715)
=5.20498615 / 4.74577259
=1.0968

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1715 / 1715) / (1444 / 1444)
=1 / 1
=1

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (0 + 231) / 49202) / (1 - (0 + 238) / 47115)
=0.99530507 / 0.99494853
=1.0004

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=1444 / 1715
=0.842

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))
=(358 / (358 + 238)) / (251 / (251 + 231))
=0.60067114 / 0.52074689
=1.1535

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)
=(831 / 1444) / (795 / 1715)
=0.57548476 / 0.46355685
=1.2415

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)
=((1402 + 0) / 49202) / ((2332 + 0) / 47115)
=0.02849478 / 0.04949591
=0.5757

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(222 - 0 - 770) / 49202
=-0.0111

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.

E*TRADE Financial Corp has a M-score of -2.47 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

E*TRADE Financial Corp Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.76088.66890.05471.19091.42750.96161.4241.17011.27441.1545
GMI 1111111111
AQI 1.00080.99970.99970.99981.00021.00031.00021.0010.99971.0002
SGI 1.3420.12846.26071.15130.93720.98010.84450.93551.05720.8013
DEPI 1.15651.07020.92560.92120.98290.99320.90690.93871.08760.9919
SGAI 0.90178.12960.22640.82690.97151.07821.20241.01230.95581.3123
LVGI 0.9541.38110.79470.75090.95710.8390.72361.03112.1140.2353
TATA -0.0047-0.0394-0.0568-0.0479-0.0232-0.01960.001-0.0223-0.009-0.0124
M-score -2.372.271.27-2.29-2.23-2.59-2.18-2.50-2.57-2.38

E*TRADE Financial Corp Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
DSRI 1.22561.17171.15661.27671.1171.11141.24911.18881.04151.0968
GMI 1111111111
AQI 1.00141.00091.00020.99970.99970.99990.99951.00021.00031.0004
SGI 1.04261.04931.1341.05521.00170.99770.78240.77820.81150.842
DEPI 0.98511.03861.08981.08761.05210.99710.96040.99191.05631.1535
SGAI 0.90750.93040.88760.95751.02991.04031.34451.35131.30791.2415
LVGI 0.97620.88710.99812.1140.75580.73970.52130.23530.58790.5757
TATA -0.0079-0.0192-0.0063-0.009-0.0017-0.007-0.019-0.0124-0.0225-0.0111
M-score -2.25-2.31-2.22-2.57-2.30-2.33-2.44-2.37-2.63-2.47
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