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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 -0.08. The lowest was -3.14. 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 * 1.0029||+||0.528 * 0.9863||+||0.404 * 1.015||+||0.892 * 0.9815||+||0.115 * 1.0597|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9936||+||4.679 * 0.032||-||0.327 * 0.988|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $3,539 Mil.|
Revenue was 7665 + 7724 + 7809 + 7994 = $31,192 Mil.
Gross Profit was 1556 + 1513 + 1542 + 1510 = $6,121 Mil.
Total Current Assets was $14,386 Mil.
Total Assets was $31,769 Mil.
Property, Plant and Equipment(Net PPE) was $3,440 Mil.
Depreciation, Depletion and Amortization(DDA) was $471 Mil.
Selling, General & Admin. Expense(SGA) was $1,928 Mil.
Total Current Liabilities was $12,135 Mil.
Long-Term Debt was $2,899 Mil.
Net Income was 758 + 717 + 764 + 733 = $2,972 Mil.
Non Operating Income was 1 + 10 + 2 + 2 = $15 Mil.
Cash Flow from Operations was 434 + 439 + 329 + 737 = $1,939 Mil.
|Accounts Receivable was $3,595 Mil.
Revenue was 7882 + 7784 + 8362 + 7751 = $31,779 Mil.
Gross Profit was 1548 + 1530 + 1596 + 1477 = $6,151 Mil.
Total Current Assets was $15,773 Mil.
Total Assets was $33,654 Mil.
Property, Plant and Equipment(Net PPE) was $3,329 Mil.
Depreciation, Depletion and Amortization(DDA) was $487 Mil.
Selling, General & Admin. Expense(SGA) was $1,977 Mil.
Total Current Liabilities was $12,708 Mil.
Long-Term Debt was $3,411 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)|
|=||(3539 / 31192)||/||(3595 / 31779)|
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)|
|=||(6151 / 31779)||/||(6121 / 31192)|
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 - (14386 + 3440) / 31769)||/||(1 - (15773 + 3329) / 33654)|
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))|
|=||(487 / (487 + 3329))||/||(471 / (471 + 3440))|
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)|
|=||(1928 / 31192)||/||(1977 / 31779)|
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)|
|=||((2899 + 12135) / 31769)||/||((3411 + 12708) / 33654)|
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|
|=||(2972 - 15||-||1939)||/||31769|
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 -2.33 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