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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 -3.16. And the median was -2.75.
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 * 1.0072||+||0.528 * 0.9204||+||0.404 * 0.9498||+||0.892 * 0.9848||+||0.115 * 1.1093|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2335||+||4.679 * -0.0529||-||0.327 * 0.9909|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $1,592 Mil.|
Revenue was 4123 + 3465 + 3897 + 3483 = $14,968 Mil.
Gross Profit was 2432 + 2093 + 2271 + 1924 = $8,720 Mil.
Total Current Assets was $3,833 Mil.
Total Assets was $52,663 Mil.
Property, Plant and Equipment(Net PPE) was $36,610 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,537 Mil.
Selling, General & Admin. Expense(SGA) was $4,559 Mil.
Total Current Liabilities was $5,876 Mil.
Long-Term Debt was $19,093 Mil.
Net Income was 395 + 187 + 222 + -306 = $498 Mil.
Non Operating Income was -28 + -3 + 17 + 5 = $-9 Mil.
Cash Flow from Operations was 1327 + 797 + 193 + 976 = $3,293 Mil.
|Accounts Receivable was $1,605 Mil.
Revenue was 3888 + 3496 + 4182 + 3633 = $15,199 Mil.
Gross Profit was 2156 + 1863 + 2110 + 2021 = $8,150 Mil.
Total Current Assets was $3,785 Mil.
Total Assets was $51,224 Mil.
Property, Plant and Equipment(Net PPE) was $34,925 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,634 Mil.
Selling, General & Admin. Expense(SGA) was $3,753 Mil.
Total Current Liabilities was $5,979 Mil.
Long-Term Debt was $18,531 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)|
|=||(1592 / 14968)||/||(1605 / 15199)|
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)|
|=||(2093 / 15199)||/||(2432 / 14968)|
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 - (3833 + 36610) / 52663)||/||(1 - (3785 + 34925) / 51224)|
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))|
|=||(1634 / (1634 + 34925))||/||(1537 / (1537 + 36610))|
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)|
|=||(4559 / 14968)||/||(3753 / 15199)|
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)|
|=||((19093 + 5876) / 52663)||/||((18531 + 5979) / 51224)|
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|
|=||(498 - -9||-||3293)||/||52663|
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 -2.82 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