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Beneish M-Score 2.62 higher than -2.22, which implies that it might have manipulated its financial results.
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 2.62. The lowest was -8.94. And the median was -2.49.
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 * 1.009||+||0.528 * 13.7197||+||0.404 * 0.9322||+||0.892 * 0.8757||+||0.115 * 0.763|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9027||+||4.679 * -0.2998||-||0.327 * 1.2117|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $850 Mil.|
Revenue was 1381 + 1436 + 1417 + 1657 = $5,891 Mil.
Gross Profit was 74 + 70 + -162 + 30 = $12 Mil.
Total Current Assets was $2,154 Mil.
Total Assets was $3,822 Mil.
Property, Plant and Equipment(Net PPE) was $229 Mil.
Depreciation, Depletion and Amortization(DDA) was $55 Mil.
Selling, General & Admin. Expense(SGA) was $200 Mil.
Total Current Liabilities was $1,671 Mil.
Long-Term Debt was $59 Mil.
Net Income was 62 + 44 + -1241 + 30 = $-1,105 Mil.
Non Operating Income was -5 + 6 + -2 + 31 = $30 Mil.
Cash Flow from Operations was -31 + -108 + -8 + 158 = $11 Mil.
|Accounts Receivable was $962 Mil.
Revenue was 1659 + 1633 + 1680 + 1755 = $6,727 Mil.
Gross Profit was 28 + 39 + 7 + 114 = $188 Mil.
Total Current Assets was $2,745 Mil.
Total Assets was $5,311 Mil.
Property, Plant and Equipment(Net PPE) was $421 Mil.
Depreciation, Depletion and Amortization(DDA) was $73 Mil.
Selling, General & Admin. Expense(SGA) was $253 Mil.
Total Current Liabilities was $1,910 Mil.
Long-Term Debt was $74 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(850 / 5891)||/||(962 / 6727)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(70 / 6727)||/||(74 / 5891)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (2154 + 229) / 3822)||/||(1 - (2745 + 421) / 5311)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(73 / (73 + 421))||/||(55 / (55 + 229))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(200 / 5891)||/||(253 / 6727)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((59 + 1671) / 3822)||/||((74 + 1910) / 5311)|
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|
|=||(-1105 - 30||-||11)||/||3822|
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 2.62 signals that the company is likely to 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