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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 -1.03. The lowest was -4.24. And the median was -2.73.
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 * 0.9933||+||0.404 * 0.7653||+||0.892 * 1.0188||+||0.115 * 0.9514|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9702||+||4.679 * -0.0772||-||0.327 * 1.0207|
|This Year (Jul16) TTM:||Last Year (Jul15) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 2918 + 2811 + 3996 + 2897 = $12,622 Mil.
Gross Profit was 1084 + 1018 + 1363 + 1082 = $4,547 Mil.
Total Current Assets was $3,876 Mil.
Total Assets was $9,166 Mil.
Property, Plant and Equipment(Net PPE) was $4,686 Mil.
Depreciation, Depletion and Amortization(DDA) was $616 Mil.
Selling, General & Admin. Expense(SGA) was $3,775 Mil.
Total Current Liabilities was $2,574 Mil.
Long-Term Debt was $4,366 Mil.
Net Income was -56 + -68 + -71 + -137 = $-332 Mil.
Non Operating Income was -34 + 4 + -10 + 0 = $-40 Mil.
Cash Flow from Operations was 186 + -394 + 856 + -232 = $416 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 2875 + 2857 + 3893 + 2764 = $12,389 Mil.
Gross Profit was 1065 + 1041 + 1314 + 1013 = $4,433 Mil.
Total Current Assets was $4,362 Mil.
Total Assets was $10,232 Mil.
Property, Plant and Equipment(Net PPE) was $4,989 Mil.
Depreciation, Depletion and Amortization(DDA) was $620 Mil.
Selling, General & Admin. Expense(SGA) was $3,819 Mil.
Total Current Liabilities was $2,347 Mil.
Long-Term Debt was $5,243 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 / 12622)||/||(0 / 12389)|
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)|
|=||(4433 / 12389)||/||(4547 / 12622)|
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 - (3876 + 4686) / 9166)||/||(1 - (4362 + 4989) / 10232)|
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))|
|=||(620 / (620 + 4989))||/||(616 / (616 + 4686))|
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)|
|=||(3775 / 12622)||/||(3819 / 12389)|
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)|
|=||((4366 + 2574) / 9166)||/||((5243 + 2347) / 10232)|
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|
|=||(-332 - -40||-||416)||/||9166|
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 -2.93 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