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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.
J.C. Penney Co Inc has a M-score of -3.01 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of J.C. Penney Co Inc was -1.81. The lowest was -3.77. And the median was -2.81.
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 J.C. Penney Co Inc 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 * 0.0768||+||0.528 * 1.0634||+||0.404 * 1.5008||+||0.892 * 0.9133||+||0.115 * 0.9531|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.989||+||4.679 * 0.0458||-||0.327 * 1.1624|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jan14) TTM:||Last Year (Jan13) TTM:|
|Accounts Receivable was $4 Mil.|
Revenue was 3782 + 2779 + 2663 + 2635 = $11,859 Mil.
Gross Profit was 1074 + 819 + 787 + 812 = $3,492 Mil.
Total Current Assets was $4,833 Mil.
Total Assets was $11,801 Mil.
Property, Plant and Equipment(Net PPE) was $5,619 Mil.
Depreciation, Depletion and Amortization(DDA) was $601 Mil.
Selling, General & Admin. Expense(SGA) was $4,096 Mil.
Total Current Liabilities was $2,846 Mil.
Long-Term Debt was $4,901 Mil.
Net Income was 35 + -489 + -586 + -348 = $-1,388 Mil.
Non Operating Income was 0 + 0 + -114 + 0 = $-114 Mil.
Cash Flow from Operations was 383 + -737 + -708 + -752 = $-1,814 Mil.
|Accounts Receivable was $57 Mil.
Revenue was 3884 + 2927 + 3022 + 3152 = $12,985 Mil.
Gross Profit was 924 + 952 + 1004 + 1186 = $4,066 Mil.
Total Current Assets was $3,683 Mil.
Total Assets was $9,781 Mil.
Property, Plant and Equipment(Net PPE) was $5,353 Mil.
Depreciation, Depletion and Amortization(DDA) was $543 Mil.
Selling, General & Admin. Expense(SGA) was $4,535 Mil.
Total Current Liabilities was $2,568 Mil.
Long-Term Debt was $2,956 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)|
|=||(4 / 11859)||/||(57 / 12985)|
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)|
|=||(819 / 12985)||/||(1074 / 11859)|
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 - (4833 + 5619) / 11801)||/||(1 - (3683 + 5353) / 9781)|
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))|
|=||(543 / (543 + 5353))||/||(601 / (601 + 5619))|
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)|
|=||(4096 / 11859)||/||(4535 / 12985)|
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)|
|=||((4901 + 2846) / 11801)||/||((2956 + 2568) / 9781)|
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|
|=||(-1388 - -114||-||-1814)||/||11801|
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.
J.C. Penney Co Inc has a M-score of -3.01 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
J.C. Penney Co Inc Annual Data
J.C. Penney Co Inc Quarterly Data