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Eaton Corp PLC (NYSE:ETN)
Beneish M-Score
-2.58 (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 -2.58 suggests that the company is not a manipulator.

ETN' s 10-Year Beneish M-Score Range
Min: -3.02   Max: -2.04
Current: -2.58

-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 -2.53.


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 * 0.9575+0.528 * 0.9784+0.404 * 1.0003+0.892 * 1.0025+0.115 * 0.9965
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.965+4.679 * -0.0094-0.327 * 1.055
=-2.58

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

This Year (Mar15) TTM:Last Year (Mar14) TTM:
Accounts Receivable was $3,733 Mil.
Revenue was 5223 + 5565 + 5728 + 5767 = $22,283 Mil.
Gross Profit was 1630 + 1718 + 1812 + 1742 = $6,902 Mil.
Total Current Assets was $7,940 Mil.
Total Assets was $32,696 Mil.
Property, Plant and Equipment(Net PPE) was $3,634 Mil.
Depreciation, Depletion and Amortization(DDA) was $960 Mil.
Selling, General & Admin. Expense(SGA) was $3,763 Mil.
Total Current Liabilities was $5,666 Mil.
Long-Term Debt was $7,829 Mil.
Net Income was 466 + 581 + 602 + 171 = $1,820 Mil.
Non Operating Income was 5 + 2 + 10 + 166 = $183 Mil.
Cash Flow from Operations was 77 + 944 + 289 + 633 = $1,943 Mil.
Accounts Receivable was $3,889 Mil.
Revenue was 5492 + 5527 + 5607 + 5602 = $22,228 Mil.
Gross Profit was 1634 + 1646 + 1724 + 1732 = $6,736 Mil.
Total Current Assets was $8,683 Mil.
Total Assets was $35,262 Mil.
Property, Plant and Equipment(Net PPE) was $3,806 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,001 Mil.
Selling, General & Admin. Expense(SGA) was $3,890 Mil.
Total Current Liabilities was $4,805 Mil.
Long-Term Debt was $8,991 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)
=(3733 / 22283) / (3889 / 22228)
=0.16752681 / 0.17495951
=0.9575

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)
=(1718 / 22228) / (1630 / 22283)
=0.30304121 / 0.30974285
=0.9784

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 - (7940 + 3634) / 32696) / (1 - (8683 + 3806) / 35262)
=0.64601174 / 0.6458227
=1.0003

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
=22283 / 22228
=1.0025

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))
=(1001 / (1001 + 3806)) / (960 / (960 + 3634))
=0.20823799 / 0.20896822
=0.9965

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)
=(3763 / 22283) / (3890 / 22228)
=0.16887313 / 0.1750045
=0.965

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)
=((7829 + 5666) / 32696) / ((8991 + 4805) / 35262)
=0.41274162 / 0.3912427
=1.055

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
=(1820 - 183 - 1943) / 32696
=-0.0094

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 -2.58 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

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
DSRI 1.39861.30661.20041.14670.77690.83850.89980.93130.98270.9575
GMI 1.00071.0151.01721.01940.98440.97760.98760.98460.9890.9784
AQI 1.27481.24861.28781.23670.95890.98470.9721.00041.00091.0003
SGI 1.01631.08981.1861.30241.35161.25861.16661.07971.0231.0025
DEPI 1.29071.11910.96570.84450.66080.74290.84760.92410.99390.9965
SGAI 1.041.04161.04211.01970.99350.98120.9810.97820.95840.965
LVGI 1.0891.07020.98481.01350.91670.95191.00770.9941.02011.055
TATA -0.0105-0.0149-0.0156-0.0134-0.0122-0.0079-0.0226-0.009-0.008-0.0094
M-score -2.04-2.10-2.08-2.06-2.46-2.46-2.56-2.53-2.52-2.58
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