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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 -3.13. 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 * 0.8658||+||0.528 * 0.9723||+||0.404 * 1.1096||+||0.892 * 1.0486||+||0.115 * 1.0657|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9474||+||4.679 * 0.0243||-||0.327 * 0.9528|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $3,796 Mil.|
Revenue was 7994 + 7882 + 7784 + 8362 = $32,022 Mil.
Gross Profit was 1510 + 1548 + 1530 + 1596 = $6,184 Mil.
Total Current Assets was $15,288 Mil.
Total Assets was $32,980 Mil.
Property, Plant and Equipment(Net PPE) was $3,370 Mil.
Depreciation, Depletion and Amortization(DDA) was $480 Mil.
Selling, General & Admin. Expense(SGA) was $1,975 Mil.
Total Current Liabilities was $13,178 Mil.
Long-Term Debt was $2,912 Mil.
Net Income was 733 + 752 + 716 + 701 = $2,902 Mil.
Non Operating Income was 2 + 0 + 3 + -3 = $2 Mil.
Cash Flow from Operations was 822 + 603 + 745 + -70 = $2,100 Mil.
|Accounts Receivable was $4,181 Mil.
Revenue was 7751 + 7474 + 7265 + 8047 = $30,537 Mil.
Gross Profit was 1477 + 1435 + 1365 + 1457 = $5,734 Mil.
Total Current Assets was $18,169 Mil.
Total Assets was $35,311 Mil.
Property, Plant and Equipment(Net PPE) was $3,322 Mil.
Depreciation, Depletion and Amortization(DDA) was $509 Mil.
Selling, General & Admin. Expense(SGA) was $1,988 Mil.
Total Current Liabilities was $14,670 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)|
|=||(3796 / 32022)||/||(4181 / 30537)|
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)|
|=||(1548 / 30537)||/||(1510 / 32022)|
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 - (15288 + 3370) / 32980)||/||(1 - (18169 + 3322) / 35311)|
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))|
|=||(509 / (509 + 3322))||/||(480 / (480 + 3370))|
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)|
|=||(1975 / 32022)||/||(1988 / 30537)|
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)|
|=||((2912 + 13178) / 32980)||/||((3410 + 14670) / 35311)|
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|
|=||(2902 - 2||-||2100)||/||32980|
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 -2.38 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