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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.
FirstEnergy Corp has a M-score of -2.68 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of FirstEnergy Corp was -2.58. The lowest was -2.68. And the median was -2.67.
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 * 1.0182||+||0.528 * 0.9877||+||0.404 * 0.9718||+||0.892 * 0.9765||+||0.115 * 0.9254|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7823||+||4.679 * -0.0427||-||0.327 * 1.0315|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $1,918 Mil.|
Revenue was 3647 + 4036 + 3519 + 3729 = $14,931 Mil.
Gross Profit was 2035 + 2259 + 2029 + 2156 = $8,479 Mil.
Total Current Assets was $3,887 Mil.
Total Assets was $50,424 Mil.
Property, Plant and Equipment(Net PPE) was $33,252 Mil.
Depreciation, Depletion and Amortization(DDA) was $909 Mil.
Selling, General & Admin. Expense(SGA) was $3,340 Mil.
Total Current Liabilities was $7,637 Mil.
Long-Term Debt was $15,831 Mil.
Net Income was 142 + 218 + -164 + 196 = $392 Mil.
Non Operating Income was 28 + 14 + -39 + -119 = $-116 Mil.
Cash Flow from Operations was 991 + 1178 + 443 + 50 = $2,662 Mil.
|Accounts Receivable was $1,929 Mil.
Revenue was 3493 + 4052 + 3755 + 3990 = $15,290 Mil.
Gross Profit was 1976 + 2353 + 2057 + 2190 = $8,576 Mil.
Total Current Assets was $3,768 Mil.
Total Assets was $50,494 Mil.
Property, Plant and Equipment(Net PPE) was $33,036 Mil.
Depreciation, Depletion and Amortization(DDA) was $834 Mil.
Selling, General & Admin. Expense(SGA) was $4,372 Mil.
Total Current Liabilities was $7,605 Mil.
Long-Term Debt was $15,179 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)|
|=||(1918 / 14931)||/||(1929 / 15290)|
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)|
|=||(2259 / 15290)||/||(2035 / 14931)|
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 - (3887 + 33252) / 50424)||/||(1 - (3768 + 33036) / 50494)|
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))|
|=||(834 / (834 + 33036))||/||(909 / (909 + 33252))|
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)|
|=||(3340 / 14931)||/||(4372 / 15290)|
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)|
|=||((15831 + 7637) / 50424)||/||((15179 + 7605) / 50494)|
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|
|=||(392 - -116||-||2662)||/||50424|
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 -2.68 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