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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 -2.71.
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 * 0.9537||+||0.404 * 0.7285||+||0.892 * 1.0317||+||0.115 * 0.957|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.931||+||4.679 * -0.0496||-||0.327 * 1.0893|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Oct15) TTM:||Last Year (Oct14) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 2897 + 2875 + 2857 + 0 = $8,629 Mil.
Gross Profit was 1082 + 1065 + 1041 + 0 = $3,188 Mil.
Total Current Assets was $4,733 Mil.
Total Assets was $10,550 Mil.
Property, Plant and Equipment(Net PPE) was $4,905 Mil.
Depreciation, Depletion and Amortization(DDA) was $616 Mil.
Selling, General & Admin. Expense(SGA) was $2,848 Mil.
Total Current Liabilities was $2,831 Mil.
Long-Term Debt was $5,161 Mil.
Net Income was -137 + -138 + -167 + 0 = $-442 Mil.
Non Operating Income was 0 + 0 + -196 + 0 = $-196 Mil.
Cash Flow from Operations was -232 + 42 + -226 + 693 = $277 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 2764 + 2799 + 2801 + 0 = $8,364 Mil.
Gross Profit was 1013 + 1008 + 926 + 0 = $2,947 Mil.
Total Current Assets was $4,440 Mil.
Total Assets was $11,065 Mil.
Property, Plant and Equipment(Net PPE) was $5,312 Mil.
Depreciation, Depletion and Amortization(DDA) was $635 Mil.
Selling, General & Admin. Expense(SGA) was $2,965 Mil.
Total Current Liabilities was $2,426 Mil.
Long-Term Debt was $5,269 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 / 8629)||/||(0 / 8364)|
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)|
|=||(1065 / 8364)||/||(1082 / 8629)|
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 - (4733 + 4905) / 10550)||/||(1 - (4440 + 5312) / 11065)|
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))|
|=||(635 / (635 + 5312))||/||(616 / (616 + 4905))|
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)|
|=||(2848 / 8629)||/||(2965 / 8364)|
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)|
|=||((5161 + 2831) / 10550)||/||((5269 + 2426) / 11065)|
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|
|=||(-442 - -196||-||277)||/||10550|
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 -2.84 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