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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 FirstEnergy Corp was -2.43. The lowest was -3.04. And the median was -2.71.
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 FirstEnergy Corp 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 * 0.9566||+||0.528 * 0.9381||+||0.404 * 0.9532||+||0.892 * 0.9602||+||0.115 * 1.0818|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2609||+||4.679 * -0.0506||-||0.327 * 0.9999|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $1,590 Mil.|
Revenue was 3465 + 3897 + 3483 + 3888 = $14,733 Mil.
Gross Profit was 2093 + 2271 + 1924 + 2156 = $8,444 Mil.
Total Current Assets was $4,113 Mil.
Total Assets was $53,005 Mil.
Property, Plant and Equipment(Net PPE) was $36,416 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,525 Mil.
Selling, General & Admin. Expense(SGA) was $4,567 Mil.
Total Current Liabilities was $6,789 Mil.
Long-Term Debt was $18,570 Mil.
Net Income was 187 + 222 + -306 + 333 = $436 Mil.
Non Operating Income was -3 + 17 + 5 + 16 = $35 Mil.
Cash Flow from Operations was 797 + 193 + 976 + 1115 = $3,081 Mil.
|Accounts Receivable was $1,731 Mil.
Revenue was 3496 + 4182 + 3633 + 4032 = $15,343 Mil.
Gross Profit was 1863 + 2110 + 2021 + 2255 = $8,249 Mil.
Total Current Assets was $4,183 Mil.
Total Assets was $51,388 Mil.
Property, Plant and Equipment(Net PPE) was $34,516 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,569 Mil.
Selling, General & Admin. Expense(SGA) was $3,772 Mil.
Total Current Liabilities was $6,173 Mil.
Long-Term Debt was $18,415 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)|
|=||(1590 / 14733)||/||(1731 / 15343)|
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)|
|=||(2271 / 15343)||/||(2093 / 14733)|
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 - (4113 + 36416) / 53005)||/||(1 - (4183 + 34516) / 51388)|
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))|
|=||(1569 / (1569 + 34516))||/||(1525 / (1525 + 36416))|
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)|
|=||(4567 / 14733)||/||(3772 / 15343)|
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)|
|=||((18570 + 6789) / 53005)||/||((18415 + 6173) / 51388)|
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|
|=||(436 - 35||-||3081)||/||53005|
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.
FirstEnergy Corp has a M-score of -2.88 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
FirstEnergy Corp Annual Data
FirstEnergy Corp Quarterly Data