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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 JC Penney Co Inc was -1.80. The lowest was -3.79. And the median was -2.86.
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 JC 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 * 1||+||0.528 * 0.9644||+||0.404 * 0.7998||+||0.892 * 1.03||+||0.115 * 0.9628|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9689||+||4.679 * -0.0791||-||0.327 * 1.0431|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 3996 + 2897 + 2875 + 2857 = $12,625 Mil.
Gross Profit was 1363 + 1082 + 1065 + 1041 = $4,551 Mil.
Total Current Assets was $4,018 Mil.
Total Assets was $9,442 Mil.
Property, Plant and Equipment(Net PPE) was $4,816 Mil.
Depreciation, Depletion and Amortization(DDA) was $616 Mil.
Selling, General & Admin. Expense(SGA) was $3,937 Mil.
Total Current Liabilities was $2,412 Mil.
Long-Term Debt was $4,678 Mil.
Net Income was -71 + -137 + -138 + -167 = $-513 Mil.
Non Operating Income was -10 + 0 + 0 + -196 = $-206 Mil.
Cash Flow from Operations was 856 + -232 + 42 + -226 = $440 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 3893 + 2764 + 2799 + 2801 = $12,257 Mil.
Gross Profit was 1314 + 1013 + 1008 + 926 = $4,261 Mil.
Total Current Assets was $4,331 Mil.
Total Assets was $10,309 Mil.
Property, Plant and Equipment(Net PPE) was $5,148 Mil.
Depreciation, Depletion and Amortization(DDA) was $631 Mil.
Selling, General & Admin. Expense(SGA) was $3,945 Mil.
Total Current Liabilities was $2,156 Mil.
Long-Term Debt was $5,265 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)|
|=||(0 / 12625)||/||(0 / 12257)|
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)|
|=||(1082 / 12257)||/||(1363 / 12625)|
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 - (4018 + 4816) / 9442)||/||(1 - (4331 + 5148) / 10309)|
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))|
|=||(631 / (631 + 5148))||/||(616 / (616 + 4816))|
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)|
|=||(3937 / 12625)||/||(3945 / 12257)|
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)|
|=||((4678 + 2412) / 9442)||/||((5265 + 2156) / 10309)|
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|
|=||(-513 - -206||-||440)||/||9442|
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.
JC Penney Co Inc has a M-score of -2.94 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
JC Penney Co Inc Annual Data
JC Penney Co Inc Quarterly Data