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Eaton Corporation PLC (NYSE:ETN)
Beneish M-Score
-2.46 (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.

Eaton Corporation PLC has a M-score of -2.46 suggests that the company is not a manipulator.

ETN' s 10-Year Beneish M-Score Range
Min: -2.93   Max: -2.04
Current: -2.46

-2.93
-2.04

During the past 13 years, the highest Beneish M-Score of Eaton Corporation PLC was -2.04. The lowest was -2.93. And the median was -2.54.


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 Eaton Corporation 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 * 0.7769+0.528 * 0.9844+0.404 * 0.9589+0.892 * 1.3516+0.115 * 0.6608
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9935+4.679 * -0.0122-0.327 * 0.9167
=-2.46

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $3,648 Mil.
Revenue was 5527 + 5607 + 5602 + 5310 = $22,046 Mil.
Gross Profit was 1646 + 1724 + 1732 + 1575 = $6,677 Mil.
Total Current Assets was $8,731 Mil.
Total Assets was $35,491 Mil.
Property, Plant and Equipment(Net PPE) was $3,833 Mil.
Depreciation, Depletion and Amortization(DDA) was $997 Mil.
Selling, General & Admin. Expense(SGA) was $3,886 Mil.
Total Current Liabilities was $4,914 Mil.
Long-Term Debt was $8,969 Mil.
Net Income was 479 + 510 + 494 + 378 = $1,861 Mil.
Non Operating Income was 11 + -7 + -6 + 10 = $8 Mil.
Cash Flow from Operations was 872 + 704 + 609 + 100 = $2,285 Mil.
Accounts Receivable was $3,474 Mil.
Revenue was 4333 + 3950 + 4068 + 3960 = $16,311 Mil.
Gross Profit was 1201 + 1203 + 1253 + 1206 = $4,863 Mil.
Total Current Assets was $7,900 Mil.
Total Assets was $35,810 Mil.
Property, Plant and Equipment(Net PPE) was $3,786 Mil.
Depreciation, Depletion and Amortization(DDA) was $598 Mil.
Selling, General & Admin. Expense(SGA) was $2,894 Mil.
Total Current Liabilities was $5,515 Mil.
Long-Term Debt was $9,765 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)
=(3648 / 22046) / (3474 / 16311)
=0.16547219 / 0.2129851
=0.7769

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)
=(1724 / 16311) / (1646 / 22046)
=0.29814236 / 0.30286673
=0.9844

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 - (8731 + 3833) / 35491) / (1 - (7900 + 3786) / 35810)
=0.64599476 / 0.67366657
=0.9589

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
=22046 / 16311
=1.3516

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))
=(598 / (598 + 3786)) / (997 / (997 + 3833))
=0.13640511 / 0.20641822
=0.6608

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)
=(3886 / 22046) / (2894 / 16311)
=0.1762678 / 0.17742628
=0.9935

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)
=((8969 + 4914) / 35491) / ((9765 + 5515) / 35810)
=0.39116959 / 0.42669645
=0.9167

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
=(1861 - 8 - 2285) / 35491
=-0.0122

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 Corporation PLC has a M-score of -2.46 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.

Eaton Corporation PLC Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.12430.9890.96021.07480.8811.07161.02070.93281.39860.7769
GMI 0.96210.99681.0430.95811.02921.04550.87470.99761.00070.9844
AQI 1.11141.05860.94971.13581.17461.03310.93930.98361.27480.9589
SGI 1.20481.11961.12491.06551.17980.77221.15511.17021.01631.3516
DEPI 1.01570.99220.98650.95860.9410.93691.04341.03361.29070.6608
SGAI 0.97250.98510.98721.03530.99581.16050.95560.94121.040.9935
LVGI 0.95871.06640.94461.02250.91810.89061.0341.02191.0890.9167
TATA -0.0186-0.0357-0.0461-0.0144-0.0255-0.0624-0.02050.0036-0.0105-0.0122
M-score -2.22-2.55-2.60-2.41-2.44-2.87-2.51-2.37-2.04-2.46

Eaton Corporation PLC Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.9190.93280.93350.95531.01611.39861.30661.20041.14670.7769
GMI 0.98660.99760.99230.99120.97761.00071.0151.01721.01940.9844
AQI 0.97320.98360.97460.96630.98311.27481.24861.28781.23670.9589
SGI 1.18931.17021.12421.06991.02121.01631.08981.1861.30241.3516
DEPI 1.05311.03361.03221.02741.08471.29071.11910.96570.84450.6608
SGAI 0.9260.94120.96270.9731.01991.041.04161.04211.01970.9935
LVGI 1.02691.02191.01571.03970.97041.0891.07020.98481.01350.9167
TATA 0.00020.0036-0.0055-0.0086-0.0073-0.0105-0.0149-0.0156-0.0134-0.0122
M-score -2.39-2.37-2.47-2.52-2.48-2.04-2.10-2.08-2.06-2.46
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