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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 * 0.9969||+||0.528 * 0.9889||+||0.404 * 1.035||+||0.892 * 1.0012||+||0.115 * 1.0787|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9553||+||4.679 * 0.0239||-||0.327 * 1.0059|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $3,654 Mil.|
Revenue was 7724 + 7809 + 7994 + 7882 = $31,409 Mil.
Gross Profit was 1513 + 1542 + 1510 + 1548 = $6,113 Mil.
Total Current Assets was $14,188 Mil.
Total Assets was $31,702 Mil.
Property, Plant and Equipment(Net PPE) was $3,477 Mil.
Depreciation, Depletion and Amortization(DDA) was $475 Mil.
Selling, General & Admin. Expense(SGA) was $1,909 Mil.
Total Current Liabilities was $12,423 Mil.
Long-Term Debt was $2,899 Mil.
Net Income was 717 + 764 + 733 + 752 = $2,966 Mil.
Non Operating Income was 10 + 2 + 2 + 0 = $14 Mil.
Cash Flow from Operations was 439 + 329 + 822 + 603 = $2,193 Mil.
|Accounts Receivable was $3,661 Mil.
Revenue was 7784 + 8362 + 7751 + 7474 = $31,371 Mil.
Gross Profit was 1530 + 1596 + 1477 + 1435 = $6,038 Mil.
Total Current Assets was $16,352 Mil.
Total Assets was $34,385 Mil.
Property, Plant and Equipment(Net PPE) was $3,323 Mil.
Depreciation, Depletion and Amortization(DDA) was $495 Mil.
Selling, General & Admin. Expense(SGA) was $1,996 Mil.
Total Current Liabilities was $13,112 Mil.
Long-Term Debt was $3,410 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)|
|=||(3654 / 31409)||/||(3661 / 31371)|
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)|
|=||(6038 / 31371)||/||(6113 / 31409)|
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 - (14188 + 3477) / 31702)||/||(1 - (16352 + 3323) / 34385)|
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))|
|=||(495 / (495 + 3323))||/||(475 / (475 + 3477))|
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)|
|=||(1909 / 31409)||/||(1996 / 31371)|
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 + 12423) / 31702)||/||((3410 + 13112) / 34385)|
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|
|=||(2966 - 14||-||2193)||/||31702|
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