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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 -2.01. The lowest was -3.03. 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 * 0.93||+||0.528 * 0.9738||+||0.404 * 1.0503||+||0.892 * 0.9965||+||0.115 * 1.0424|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9747||+||4.679 * -0.0338||-||0.327 * 1.0657|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $4,050 Mil.|
Revenue was 8362 + 7751 + 7474 + 7324 = $30,911 Mil.
Gross Profit was 1596 + 1477 + 1435 + 1370 = $5,878 Mil.
Total Current Assets was $17,407 Mil.
Total Assets was $35,355 Mil.
Property, Plant and Equipment(Net PPE) was $3,329 Mil.
Depreciation, Depletion and Amortization(DDA) was $496 Mil.
Selling, General & Admin. Expense(SGA) was $1,992 Mil.
Total Current Liabilities was $13,751 Mil.
Long-Term Debt was $3,410 Mil.
Net Income was 701 + 696 + 541 + 595 = $2,533 Mil.
Non Operating Income was -3 + 1 + 0 + 2 = $0 Mil.
Cash Flow from Operations was -70 + 2504 + 866 + 428 = $3,728 Mil.
|Accounts Receivable was $4,370 Mil.
Revenue was 8047 + 7735 + 7834 + 7404 = $31,020 Mil.
Gross Profit was 1457 + 1458 + 1475 + 1354 = $5,744 Mil.
Total Current Assets was $18,162 Mil.
Total Assets was $35,494 Mil.
Property, Plant and Equipment(Net PPE) was $3,359 Mil.
Depreciation, Depletion and Amortization(DDA) was $525 Mil.
Selling, General & Admin. Expense(SGA) was $2,051 Mil.
Total Current Liabilities was $12,259 Mil.
Long-Term Debt was $3,908 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)|
|=||(4050 / 30911)||/||(4370 / 31020)|
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)|
|=||(1477 / 31020)||/||(1596 / 30911)|
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 - (17407 + 3329) / 35355)||/||(1 - (18162 + 3359) / 35494)|
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))|
|=||(525 / (525 + 3359))||/||(496 / (496 + 3329))|
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)|
|=||(1992 / 30911)||/||(2051 / 31020)|
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)|
|=||((3410 + 13751) / 35355)||/||((3908 + 12259) / 35494)|
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|
|=||(2533 - 0||-||3728)||/||35355|
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 -2.71 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