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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 Eaton Corp PLC was -2.04. The lowest was -2.93. And the median was -2.56.
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 Eaton Corp PLC 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 * 1.0807||+||0.528 * 0.9791||+||0.404 * 0.9808||+||0.892 * 0.9469||+||0.115 * 0.9695|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0294||+||4.679 * -0.0242||-||0.327 * 1.0046|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $3,560 Mil.|
Revenue was 4867 + 4987 + 5080 + 4813 = $19,747 Mil.
Gross Profit was 1548 + 1616 + 1661 + 1522 = $6,347 Mil.
Total Current Assets was $6,941 Mil.
Total Assets was $30,419 Mil.
Property, Plant and Equipment(Net PPE) was $3,443 Mil.
Depreciation, Depletion and Amortization(DDA) was $929 Mil.
Selling, General & Admin. Expense(SGA) was $3,505 Mil.
Total Current Liabilities was $5,485 Mil.
Long-Term Debt was $6,711 Mil.
Net Income was 504 + 523 + 491 + 404 = $1,922 Mil.
Non Operating Income was 79 + 15 + -5 + 18 = $107 Mil.
Cash Flow from Operations was 638 + 798 + 745 + 371 = $2,552 Mil.
|Accounts Receivable was $3,479 Mil.
Revenue was 5057 + 5203 + 5372 + 5223 = $20,855 Mil.
Gross Profit was 1630 + 1606 + 1697 + 1630 = $6,563 Mil.
Total Current Assets was $6,616 Mil.
Total Assets was $30,996 Mil.
Property, Plant and Equipment(Net PPE) was $3,565 Mil.
Depreciation, Depletion and Amortization(DDA) was $925 Mil.
Selling, General & Admin. Expense(SGA) was $3,596 Mil.
Total Current Liabilities was $4,625 Mil.
Long-Term Debt was $7,746 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)|
|=||(3560 / 19747)||/||(3479 / 20855)|
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)|
|=||(6563 / 20855)||/||(6347 / 19747)|
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 - (6941 + 3443) / 30419)||/||(1 - (6616 + 3565) / 30996)|
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))|
|=||(925 / (925 + 3565))||/||(929 / (929 + 3443))|
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)|
|=||(3505 / 19747)||/||(3596 / 20855)|
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)|
|=||((6711 + 5485) / 30419)||/||((7746 + 4625) / 30996)|
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|
|=||(1922 - 107||-||2552)||/||30419|
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.
Eaton Corp PLC has a M-score of -2.60 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
Eaton Corp PLC Annual Data
Eaton Corp PLC Quarterly Data