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ITT Corp (NYSE:ITT)
Beneish M-Score
-2.05 (As of Today)

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.

ITT Corp has a M-score of -2.05 signals that the company is a manipulator.

ITT' s 10-Year Beneish M-Score Range
Min: -3.67   Max: 1.65
Current: -2.05

-3.67
1.65

During the past 13 years, the highest Beneish M-Score of ITT Corp was 1.65. The lowest was -3.67. And the median was -2.42.


Definition

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 ITT 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 * 1.0065+0.528 * 0.9532+0.404 * 1.0135+0.892 * 1.1208+0.115 * 0.9451
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1086+4.679 * 0.0719-0.327 * 0.936
=-2.05

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $497 Mil.
Revenue was 645.5 + 634 + 609.2 + 608.2 = $2,497 Mil.
Gross Profit was 208.6 + 202.9 + 197.8 + 190.5 = $800 Mil.
Total Current Assets was $1,666 Mil.
Total Assets was $3,740 Mil.
Property, Plant and Equipment(Net PPE) was $426 Mil.
Depreciation, Depletion and Amortization(DDA) was $87 Mil.
Selling, General & Admin. Expense(SGA) was $500 Mil.
Total Current Liabilities was $833 Mil.
Long-Term Debt was $0 Mil.
Net Income was 11.2 + 430.7 + 25.8 + 20.8 = $489 Mil.
Non Operating Income was -1.8 + 0 + 0 + -5.4 = $-7 Mil.
Cash Flow from Operations was 146.4 + 15.1 + 77.8 + -12.7 = $227 Mil.
Accounts Receivable was $440 Mil.
Revenue was 554.3 + 547.5 + 557.9 + 568.1 = $2,228 Mil.
Gross Profit was 173.4 + 166.2 + 170.4 + 170.2 = $680 Mil.
Total Current Assets was $1,540 Mil.
Total Assets was $3,386 Mil.
Property, Plant and Equipment(Net PPE) was $373 Mil.
Depreciation, Depletion and Amortization(DDA) was $71 Mil.
Selling, General & Admin. Expense(SGA) was $403 Mil.
Total Current Liabilities was $805 Mil.
Long-Term Debt was $0 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(496.7 / 2496.9) / (440.3 / 2227.8)
=0.19892667 / 0.19763893
=1.0065

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(202.9 / 2227.8) / (208.6 / 2496.9)
=0.30532364 / 0.32031719
=0.9532

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (1665.5 + 426.2) / 3740.2) / (1 - (1540.4 + 373.1) / 3386.1)
=0.44075183 / 0.4348956
=1.0135

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=2496.9 / 2227.8
=1.1208

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))
=(71.1 / (71.1 + 373.1)) / (86.9 / (86.9 + 426.2))
=0.16006303 / 0.1693627
=0.9451

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)
=(500.1 / 2496.9) / (402.5 / 2227.8)
=0.20028836 / 0.18067151
=1.1086

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)
=((0 + 832.6) / 3740.2) / ((0 + 805.3) / 3386.1)
=0.22260842 / 0.23782523
=0.936

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(488.5 - -7.2 - 226.6) / 3740.2
=0.0719

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.

ITT Corp has a M-score of -2.05 signals that the company is likely to be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

ITT Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.98660.91350.97041.30190.78020.97996.25710.18211.05561.0065
GMI 0.99051.00050.99690.9831.02480.98260.8871.03281.01290.9532
AQI 1.08820.89350.91231.11241.05930.99481.06830.78681.00521.0135
SGI 1.15531.18031.1091.15311.29890.91270.17711.10311.06821.1208
DEPI 1.02040.82050.97011.19020.72711.01354.26690.27861.13430.9451
SGAI 1.01480.94571.02750.99020.98821.13982.28341.03310.47021.1093
LVGI 1.14421.06850.95881.21260.83490.84890.90450.69261.0420.936
TATA -0.0115-0.0124-0.0361-0.0023-0.0289-0.0544-0.0322-0.1007-0.03440.0705
M-score -2.42-2.53-2.61-2.09-2.49-2.821.63-3.67-2.43-2.06

ITT Corp Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 5.79410.18210.27610.27380.20651.05550.78620.76471.18491.0065
GMI 0.90181.03291.04671.05861.05621.01280.98790.96130.95150.9532
AQI 0.85790.78680.35460.76270.70021.00522.18711.01161.17611.0135
SGI -0.41491.1031.12161.12451.14121.06821.06951.09081.11491.1208
DEPI -2.32730.27860.89410.28890.29151.13430.31670.95090.93650.9451
SGAI 1.90971.0340.94650.9250.86760.45560.50840.56120.57111.1086
LVGI 1.2010.68930.74870.75530.67851.0471.01261.00441.01590.936
TATA -0.0225-0.1017-0.1122-0.1447-0.117-0.0335-0.019-0.01370.09670.0719
M-score -0.15-3.67-3.72-3.77-3.68-2.42-2.23-2.63-1.65-2.05
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