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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 -3.02. And the median was -2.53.
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 * 0.9313||+||0.528 * 0.9846||+||0.404 * 1.0004||+||0.892 * 1.0797||+||0.115 * 0.9241|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9782||+||4.679 * -0.009||-||0.327 * 0.994|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $3,972 Mil.|
Revenue was 5728 + 5767 + 5492 + 5527 = $22,514 Mil.
Gross Profit was 1812 + 1742 + 1634 + 1646 = $6,834 Mil.
Total Current Assets was $8,431 Mil.
Total Assets was $34,239 Mil.
Property, Plant and Equipment(Net PPE) was $3,702 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,000 Mil.
Selling, General & Admin. Expense(SGA) was $3,908 Mil.
Total Current Liabilities was $4,986 Mil.
Long-Term Debt was $8,587 Mil.
Net Income was 602 + 171 + 439 + 479 = $1,691 Mil.
Non Operating Income was 10 + 166 + 5 + 11 = $192 Mil.
Cash Flow from Operations was 289 + 633 + 12 + 872 = $1,806 Mil.
|Accounts Receivable was $3,950 Mil.
Revenue was 5607 + 5602 + 5310 + 4333 = $20,852 Mil.
Gross Profit was 1724 + 1732 + 1575 + 1201 = $6,232 Mil.
Total Current Assets was $8,766 Mil.
Total Assets was $35,312 Mil.
Property, Plant and Equipment(Net PPE) was $3,757 Mil.
Depreciation, Depletion and Amortization(DDA) was $919 Mil.
Selling, General & Admin. Expense(SGA) was $3,700 Mil.
Total Current Liabilities was $5,054 Mil.
Long-Term Debt was $9,029 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)|
|=||(3972 / 22514)||/||(3950 / 20852)|
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)|
|=||(1742 / 20852)||/||(1812 / 22514)|
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 - (8431 + 3702) / 34239)||/||(1 - (8766 + 3757) / 35312)|
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))|
|=||(919 / (919 + 3757))||/||(1000 / (1000 + 3702))|
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)|
|=||(3908 / 22514)||/||(3700 / 20852)|
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)|
|=||((8587 + 4986) / 34239)||/||((9029 + 5054) / 35312)|
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|
|=||(1691 - 192||-||1806)||/||34239|
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 -2.53 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
Eaton Corp PLC Annual Data
Eaton Corp PLC Quarterly Data