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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 -2.65 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of FirstEnergy Corp was -2.56. The lowest was -3.13. And the median was -2.69.
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 * 0.9809||+||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|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $1,962 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 $1,923 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
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(1962 / 15368)||/||(1923 / 14775)|
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)|
|=||(2117 / 14775)||/||(1863 / 15368)|
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 - (4183 + 34516) / 51388)||/||(1 - (3560 + 33091) / 50157)|
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))|
|=||(1148 / (1148 + 33091))||/||(1205 / (1205 + 34516))|
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)|
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)|
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|
|=||(632 - 85||-||2791)||/||51388|
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 -2.65 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