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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 KBR Inc was -1.06. The lowest was -8.94. And the median was -2.50.
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 KBR 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 * 1.0035||+||0.528 * -7.7561||+||0.404 * 0.9152||+||0.892 * 0.879||+||0.115 * 0.663|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9688||+||4.679 * -0.3307||-||0.327 * 1.3643|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $823 Mil.|
Revenue was 1436 + 1417 + 1657 + 1659 = $6,169 Mil.
Gross Profit was 70 + -162 + 30 + 28 = $-34 Mil.
Total Current Assets was $2,233 Mil.
Total Assets was $3,883 Mil.
Property, Plant and Equipment(Net PPE) was $230 Mil.
Depreciation, Depletion and Amortization(DDA) was $65 Mil.
Selling, General & Admin. Expense(SGA) was $218 Mil.
Total Current Liabilities was $1,819 Mil.
Long-Term Debt was $60 Mil.
Net Income was 44 + -1241 + 30 + -8 = $-1,175 Mil.
Non Operating Income was 6 + -2 + 31 + -5 = $30 Mil.
Cash Flow from Operations was -108 + -8 + 158 + 37 = $79 Mil.
|Accounts Receivable was $933 Mil.
Revenue was 1633 + 1680 + 1755 + 1950 = $7,018 Mil.
Gross Profit was 39 + 7 + 114 + 140 = $300 Mil.
Total Current Assets was $2,781 Mil.
Total Assets was $5,323 Mil.
Property, Plant and Equipment(Net PPE) was $415 Mil.
Depreciation, Depletion and Amortization(DDA) was $71 Mil.
Selling, General & Admin. Expense(SGA) was $256 Mil.
Total Current Liabilities was $1,888 Mil.
Long-Term Debt was $0 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(823 / 6169)||/||(933 / 7018)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(-162 / 7018)||/||(70 / 6169)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (2233 + 230) / 3883)||/||(1 - (2781 + 415) / 5323)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(71 / (71 + 415))||/||(65 / (65 + 230))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(218 / 6169)||/||(256 / 7018)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((60 + 1819) / 3883)||/||((0 + 1888) / 5323)|
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|
|=||(-1175 - 30||-||79)||/||3883|
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.
KBR Inc has a M-score of -8.94 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
KBR Inc Annual Data
KBR Inc Quarterly Data