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Eaton Corp PLC (NYSE:ETN)
Beneish M-Score
-2.56 (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 -2.56 suggests that the company is not a manipulator.

ETN' s 10-Year Beneish M-Score Range
Min: -3.03   Max: -2.02
Current: -2.56

-3.03
-2.02

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.


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 * 0.8998+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
=-2.56

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

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

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)
=(4010 / 22393) / (3820 / 19195)
=0.17907382 / 0.19901016
=0.8998

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)
=(1634 / 19195) / (1742 / 22393)
=0.2975254 / 0.30125486
=0.9876

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 - (8838 + 3793) / 35258) / (1 - (8229 + 3749) / 35257)
=0.64175506 / 0.66026605
=0.972

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
=22393 / 19195
=1.1666

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))
=0.17767054 / 0.20962701
=0.8476

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)
=0.17478676 / 0.1781714
=0.981

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)
=0.40155426 / 0.39850243
=1.0077

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
=(1599 - 175 - 2221) / 35258
=-0.0226

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.


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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.11230.9780.97051.0870.8811.07161.02070.93281.41310.769
GMI 0.96360.99791.04020.95811.02921.04550.87470.99761.00070.9844
AQI 1.11141.05860.94971.13581.17461.03310.93930.98361.27360.9598
SGI 1.21781.13221.11291.05361.17980.77221.15511.17021.01631.3516
DEPI 1.01570.99220.98650.95860.91350.9651.04341.03361.31750.6474
SGAI 0.96460.97780.99521.04330.99581.16050.95560.94121.040.9935
LVGI 0.95871.06640.96640.99940.91810.89061.0341.02191.08170.923
TATA -0.0179-0.0349-0.0456-0.0133-0.0233-0.0635-0.02040.0036-0.0105-0.0122
M-score -2.22-2.54-2.61-2.39-2.43-2.87-2.51-2.37-2.02-2.47

Eaton Corp PLC Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.93350.95531.01611.41311.30661.20041.14670.7690.83850.8998
GMI 0.99230.99120.97761.00071.0151.01721.01940.98440.97760.9876
AQI 0.97460.96630.98311.27361.24861.28781.23670.95980.98470.972
SGI 1.12421.06991.02121.01631.08981.1861.30241.35161.25861.1666
DEPI 1.03221.02741.08471.31751.11910.96570.84450.64740.74290.8476
SGAI 0.96270.9731.01991.041.04161.04211.01970.99350.98120.981
LVGI 1.01571.03970.97041.08171.07020.98481.01350.9230.95191.0077
TATA -0.0055-0.0086-0.0073-0.0105-0.0149-0.0156-0.0134-0.0122-0.0079-0.0226
M-score -2.47-2.52-2.48-2.02-2.10-2.08-2.06-2.47-2.46-2.56
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