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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.
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 -2.52.
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 * 0.97||+||0.528 * 0.975||+||0.404 * 1.0116||+||0.892 * 0.9489||+||0.115 * 1.0319|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9778||+||4.679 * -0.0378||-||0.327 * 1.0129|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $3,656 Mil.|
Revenue was 5203 + 5372 + 5223 + 5565 = $21,363 Mil.
Gross Profit was 1606 + 1697 + 1630 + 1718 = $6,651 Mil.
Total Current Assets was $7,579 Mil.
Total Assets was $32,201 Mil.
Property, Plant and Equipment(Net PPE) was $3,590 Mil.
Depreciation, Depletion and Amortization(DDA) was $932 Mil.
Selling, General & Admin. Expense(SGA) was $3,626 Mil.
Total Current Liabilities was $5,100 Mil.
Long-Term Debt was $7,830 Mil.
Net Income was 446 + 535 + 466 + 581 = $2,028 Mil.
Non Operating Income was 3 + 19 + 5 + 646 = $673 Mil.
Cash Flow from Operations was 973 + 579 + 77 + 944 = $2,573 Mil.
|Accounts Receivable was $3,972 Mil.
Revenue was 5728 + 5767 + 5492 + 5527 = $22,514 Mil.
Gross Profit was 1812 + 1742 + 1634 + 1646 = $6,834 Mil.
Total Current Assets was $8,431 Mil.
Total Assets was $34,239 Mil.
Property, Plant and Equipment(Net PPE) was $3,702 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,000 Mil.
Selling, General & Admin. Expense(SGA) was $3,908 Mil.
Total Current Liabilities was $4,986 Mil.
Long-Term Debt was $8,587 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)|
|=||(3656 / 21363)||/||(3972 / 22514)|
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)|
|=||(1697 / 22514)||/||(1606 / 21363)|
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 - (7579 + 3590) / 32201)||/||(1 - (8431 + 3702) / 34239)|
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))|
|=||(1000 / (1000 + 3702))||/||(932 / (932 + 3590))|
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)|
|=||(3626 / 21363)||/||(3908 / 22514)|
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)|
|=||((7830 + 5100) / 32201)||/||((8587 + 4986) / 34239)|
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|
|=||(2028 - 673||-||2573)||/||32201|
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 -2.74 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