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FirstEnergy Corp (NYSE:FE)
Beneish M-Score
-2.62 (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.

FirstEnergy Corp has a M-score of -2.62 suggests that the company is not a manipulator.

FE' s 10-Year Beneish M-Score Range
Min: -3.16   Max: -2.43
Current: -2.62

-3.16
-2.43

During the past 13 years, the highest Beneish M-Score of FirstEnergy Corp was -2.43. The lowest was -3.16. And the median was -2.70.


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 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 * 1.0111+0.528 * 1.0672+0.404 * 0.917+0.892 * 1.0401+0.115 * 0.9939
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.824+4.679 * -0.0437-0.327 * 1.0443
=-2.62

* 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 $1,731 Mil.
Revenue was 3496 + 4189 + 3647 + 4036 = $15,368 Mil.
Gross Profit was 1863 + 2117 + 2035 + 2259 = $8,274 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 $1,205 Mil.
Selling, General & Admin. Expense(SGA) was $3,772 Mil.
Total Current Liabilities was $6,173 Mil.
Long-Term Debt was $18,415 Mil.
Net Income was 64 + 208 + 142 + 218 = $632 Mil.
Non Operating Income was 28 + 15 + 28 + 14 = $85 Mil.
Cash Flow from Operations was 714 + -92 + 991 + 1178 = $2,791 Mil.
Accounts Receivable was $1,646 Mil.
Revenue was 3507 + 3723 + 3493 + 4052 = $14,775 Mil.
Gross Profit was 2013 + 2147 + 1976 + 2353 = $8,489 Mil.
Total Current Assets was $3,560 Mil.
Total Assets was $50,157 Mil.
Property, Plant and Equipment(Net PPE) was $33,091 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,148 Mil.
Selling, General & Admin. Expense(SGA) was $4,401 Mil.
Total Current Liabilities was $7,533 Mil.
Long-Term Debt was $15,449 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)
=(1731 / 15368) / (1646 / 14775)
=0.11263665 / 0.1114044
=1.0111

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)
=(2117 / 14775) / (1863 / 15368)
=0.57455161 / 0.53839146
=1.0672

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 - (4183 + 34516) / 51388) / (1 - (3560 + 33091) / 50157)
=0.24692535 / 0.26927448
=0.917

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
=15368 / 14775
=1.0401

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))
=(1148 / (1148 + 33091)) / (1205 / (1205 + 34516))
=0.03352902 / 0.03373366
=0.9939

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)
=(3772 / 15368) / (4401 / 14775)
=0.24544508 / 0.29786802
=0.824

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)
=((18415 + 6173) / 51388) / ((15449 + 7533) / 50157)
=0.47847747 / 0.45820125
=1.0443

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
=(632 - 85 - 2791) / 51388
=-0.0437

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 -2.62 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.

FirstEnergy Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.00211.08831.06470.95111.0911
GMI 1.07371.0010.98450.990.988
AQI 0.90630.94380.88580.94110.9718
SGI 0.9521.02821.21050.94590.9767
DEPI 0.99481.01281.07581.03610.9391
SGAI 0.93041.04721.27191.03310.782
LVGI 1.03740.99020.87561.03811.0315
TATA -0.0485-0.0704-0.0605-0.0322-0.0431
M-score -2.75-2.73-2.57-2.77-2.62

FirstEnergy Corp Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.72810.92641.11670.95011.41351.10760.91091.09260.98261.0111
GMI 0.98960.98381.00680.98880.97890.970.97830.98941.03691.0672
AQI 1.00831.00050.94250.94110.94520.94630.96830.97180.92110.917
SGI 1.21651.11841.00410.94690.90710.90890.94680.97531.02371.0401
DEPI 0.72730.81340.97951.03611.07381.04570.96670.93910.96020.9939
SGAI 1.1051.03471.04181.03271.13831.16621.16050.78260.80090.824
LVGI 0.94190.95490.99721.03811.01891.03651.04361.03151.05271.0443
TATA -0.0353-0.0336-0.0355-0.032-0.0414-0.047-0.0497-0.0431-0.0417-0.0437
M-score -2.73-2.62-2.56-2.77-2.43-2.75-2.91-2.62-2.67-2.62
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