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Eaton Corp PLC (NYSE:ETN)
Beneish M-Score
-2.48 (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 Corp PLC has a M-score of -2.48 suggests that the company is not a manipulator.

ETN' s 10-Year Beneish M-Score Range
Min: -3.02   Max: -2.04
Current: -2.48

-3.02
-2.04

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 -2.51.


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 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 * 0.9797+0.528 * 0.9616+0.404 * 1.0166+0.892 * 0.9774+0.115 * 1.0268
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9619+4.679 * 0.0079-0.327 * 0.9804
=-2.48

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

This Year (Jun15) TTM:Last Year (Jun14) TTM:
Accounts Receivable was $3,840 Mil.
Revenue was 5372 + 5223 + 5565 + 5728 = $21,888 Mil.
Gross Profit was 1697 + 1630 + 1718 + 1812 = $6,857 Mil.
Total Current Assets was $7,644 Mil.
Total Assets was $32,579 Mil.
Property, Plant and Equipment(Net PPE) was $3,680 Mil.
Depreciation, Depletion and Amortization(DDA) was $944 Mil.
Selling, General & Admin. Expense(SGA) was $3,680 Mil.
Total Current Liabilities was $5,056 Mil.
Long-Term Debt was $7,770 Mil.
Net Income was 535 + 466 + 581 + 602 = $2,184 Mil.
Non Operating Income was 19 + 5 + 2 + 10 = $36 Mil.
Cash Flow from Operations was 579 + 77 + 944 + 289 = $1,889 Mil.
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.



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)
=(3840 / 21888) / (4010 / 22393)
=0.1754386 / 0.17907382
=0.9797

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)
=(1630 / 22393) / (1697 / 21888)
=0.30125486 / 0.31327668
=0.9616

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 - (7644 + 3680) / 32579) / (1 - (8838 + 3793) / 35258)
=0.65241413 / 0.64175506
=1.0166

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
=21888 / 22393
=0.9774

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))
=(1006 / (1006 + 3793)) / (944 / (944 + 3680))
=0.20962701 / 0.20415225
=1.0268

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)
=(3680 / 21888) / (3914 / 22393)
=0.16812865 / 0.17478676
=0.9619

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)
=((7770 + 5056) / 32579) / ((8615 + 5543) / 35258)
=0.39368919 / 0.40155426
=0.9804

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
=(2184 - 36 - 1889) / 32579
=0.0079

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 -2.48 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 Corp PLC Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.9890.96021.07480.8811.07161.02070.93281.39860.77690.9827
GMI 0.99681.0430.95811.02921.04550.87470.99761.00070.98440.989
AQI 1.05860.94971.13581.17461.03310.93930.98361.27480.95891.0009
SGI 1.11961.12491.06551.17980.77221.15511.17021.01631.35161.023
DEPI 0.99220.98650.95860.9410.93691.04341.03361.29070.66080.9939
SGAI 0.98510.98721.03530.99581.16050.95560.94121.040.99350.9584
LVGI 1.06640.94461.02250.91810.89061.0341.02191.0890.91671.0201
TATA -0.0357-0.0461-0.0144-0.0255-0.0624-0.02050.0036-0.0105-0.0122-0.008
M-score -2.55-2.60-2.41-2.44-2.87-2.51-2.37-2.04-2.46-2.52

Eaton Corp PLC Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
DSRI 1.30661.20041.14670.77690.83850.89980.93130.98270.95750.9797
GMI 1.0151.01721.01940.98440.97760.98760.98460.9890.97840.9616
AQI 1.24861.28781.23670.95890.98470.9721.00041.00091.00031.0166
SGI 1.08981.1861.30241.35161.25861.16661.07971.0231.00250.9774
DEPI 1.11910.96570.84450.66080.74290.84760.92410.99390.99651.0268
SGAI 1.04161.04211.01970.99350.98120.9810.97820.95840.9650.9619
LVGI 1.07020.98481.01350.91670.95191.00770.9941.02011.0550.9804
TATA -0.0149-0.0156-0.0134-0.0122-0.0079-0.00430.00980.01120.01030.0079
M-score -2.10-2.08-2.06-2.46-2.46-2.48-2.44-2.43-2.49-2.48
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