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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.
Eaton Corp PLC has a M-score of -2.56 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Eaton Corp PLC was -2.02. The lowest was -3.03. And the median was -2.54.
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 * 0.8998||+||0.528 * 0.9876||+||0.404 * 0.972||+||0.892 * 1.1666||+||0.115 * 0.8476|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.981||+||4.679 * -0.0226||-||0.327 * 1.0077|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $4,010 Mil.|
Revenue was 5767 + 5492 + 5527 + 5607 = $22,393 Mil.
Gross Profit was 1742 + 1634 + 1646 + 1724 = $6,746 Mil.
Total Current Assets was $8,838 Mil.
Total Assets was $35,258 Mil.
Property, Plant and Equipment(Net PPE) was $3,793 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,006 Mil.
Selling, General & Admin. Expense(SGA) was $3,914 Mil.
Total Current Liabilities was $5,543 Mil.
Long-Term Debt was $8,615 Mil.
Net Income was 171 + 439 + 479 + 510 = $1,599 Mil.
Non Operating Income was 166 + 5 + 11 + -7 = $175 Mil.
Cash Flow from Operations was 633 + 12 + 872 + 704 = $2,221 Mil.
|Accounts Receivable was $3,820 Mil.
Revenue was 5602 + 5310 + 4333 + 3950 = $19,195 Mil.
Gross Profit was 1732 + 1575 + 1201 + 1203 = $5,711 Mil.
Total Current Assets was $8,229 Mil.
Total Assets was $35,257 Mil.
Property, Plant and Equipment(Net PPE) was $3,749 Mil.
Depreciation, Depletion and Amortization(DDA) was $810 Mil.
Selling, General & Admin. Expense(SGA) was $3,420 Mil.
Total Current Liabilities was $4,981 Mil.
Long-Term Debt was $9,069 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)|
|=||(4010 / 22393)||/||(3820 / 19195)|
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)|
|=||(1634 / 19195)||/||(1742 / 22393)|
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 - (8838 + 3793) / 35258)||/||(1 - (8229 + 3749) / 35257)|
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))|
|=||(810 / (810 + 3749))||/||(1006 / (1006 + 3793))|
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)|
|=||(3914 / 22393)||/||(3420 / 19195)|
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)|
|=||((8615 + 5543) / 35258)||/||((9069 + 4981) / 35257)|
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|
|=||(1599 - 175||-||2221)||/||35258|
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 -2.56 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