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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 General Dynamics Corp was -2.04. The lowest was -3.08. And the median was -2.45.
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 General Dynamics 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 * 1.0518||+||0.528 * 0.9773||+||0.404 * 0.9732||+||0.892 * 0.9963||+||0.115 * 1.0544|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9975||+||4.679 * 0.0226||-||0.327 * 1.0045|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $3,611 Mil.|
Revenue was 8233 + 7731 + 7665 + 7724 = $31,353 Mil.
Gross Profit was 1640 + 1540 + 1556 + 1513 = $6,249 Mil.
Total Current Assets was $15,447 Mil.
Total Assets was $32,872 Mil.
Property, Plant and Equipment(Net PPE) was $3,467 Mil.
Depreciation, Depletion and Amortization(DDA) was $454 Mil.
Selling, General & Admin. Expense(SGA) was $1,940 Mil.
Total Current Liabilities was $12,846 Mil.
Long-Term Debt was $2,988 Mil.
Net Income was 797 + 683 + 758 + 717 = $2,955 Mil.
Non Operating Income was 0 + 2 + 1 + 10 = $13 Mil.
Cash Flow from Operations was 826 + 499 + 434 + 439 = $2,198 Mil.
|Accounts Receivable was $3,446 Mil.
Revenue was 7809 + 7994 + 7882 + 7784 = $31,469 Mil.
Gross Profit was 1542 + 1510 + 1548 + 1530 = $6,130 Mil.
Total Current Assets was $14,571 Mil.
Total Assets was $31,997 Mil.
Property, Plant and Equipment(Net PPE) was $3,466 Mil.
Depreciation, Depletion and Amortization(DDA) was $482 Mil.
Selling, General & Admin. Expense(SGA) was $1,952 Mil.
Total Current Liabilities was $12,445 Mil.
Long-Term Debt was $2,898 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)|
|=||(3611 / 31353)||/||(3446 / 31469)|
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)|
|=||(6130 / 31469)||/||(6249 / 31353)|
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 - (15447 + 3467) / 32872)||/||(1 - (14571 + 3466) / 31997)|
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))|
|=||(482 / (482 + 3466))||/||(454 / (454 + 3467))|
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)|
|=||(1940 / 31353)||/||(1952 / 31469)|
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)|
|=||((2988 + 12846) / 32872)||/||((2898 + 12445) / 31997)|
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|
|=||(2955 - 13||-||2198)||/||32872|
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.
General Dynamics Corp has a M-score of -2.35 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
General Dynamics Corp Annual Data
General Dynamics Corp Quarterly Data