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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 * 0.7717||+||0.528 * 0.9674||+||0.404 * 1.074||+||0.892 * 1.0412||+||0.115 * 1.045|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9461||+||4.679 * -0.0273||-||0.327 * 0.9887|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|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.
Net Income was 752 + 716 + 701 + 696 = $2,865 Mil.
Non Operating Income was 0 + 3 + -3 + 1 = $1 Mil.
Cash Flow from Operations was 603 + 745 + -70 + 2504 = $3,782 Mil.
|Accounts Receivable was $4,474 Mil.
Revenue was 7474 + 7265 + 8047 + 7735 = $30,521 Mil.
Gross Profit was 1435 + 1365 + 1457 + 1458 = $5,715 Mil.
Total Current Assets was $17,183 Mil.
Total Assets was $34,332 Mil.
Property, Plant and Equipment(Net PPE) was $3,327 Mil.
Depreciation, Depletion and Amortization(DDA) was $512 Mil.
Selling, General & Admin. Expense(SGA) was $2,007 Mil.
Total Current Liabilities was $13,222 Mil.
Long-Term Debt was $3,409 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)|
|=||(3595 / 31779)||/||(4474 / 30521)|
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)|
|=||(1530 / 30521)||/||(1548 / 31779)|
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 - (15773 + 3329) / 33654)||/||(1 - (17183 + 3327) / 34332)|
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))|
|=||(512 / (512 + 3327))||/||(487 / (487 + 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)|
|=||(1977 / 31779)||/||(2007 / 30521)|
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)|
|=||((3411 + 12708) / 33654)||/||((3409 + 13222) / 34332)|
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|
|=||(2865 - 1||-||3782)||/||33654|
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 -2.75 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