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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 2.62. The lowest was -8.94. And the median was -2.52.
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 * 1.3235||+||0.528 * 0.264||+||0.404 * 1.3202||+||0.892 * 0.7653||+||0.115 * 0.9472|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0671||+||4.679 * -0.0167||-||0.327 * 1.2264|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $708 Mil.|
Revenue was 1073 + 1009 + 996 + 1080 = $4,158 Mil.
Gross Profit was -36 + 74 + 68 + 94 = $200 Mil.
Total Current Assets was $1,790 Mil.
Total Assets was $4,242 Mil.
Property, Plant and Equipment(Net PPE) was $165 Mil.
Depreciation, Depletion and Amortization(DDA) was $41 Mil.
Selling, General & Admin. Expense(SGA) was $147 Mil.
Total Current Liabilities was $1,550 Mil.
Long-Term Debt was $690 Mil.
Net Income was -63 + 47 + 42 + 42 = $68 Mil.
Non Operating Income was -1 + 7 + -5 + -2 = $-1 Mil.
Cash Flow from Operations was 20 + 9 + -21 + 132 = $140 Mil.
|Accounts Receivable was $699 Mil.
Revenue was 1199 + 1381 + 1436 + 1417 = $5,433 Mil.
Gross Profit was 87 + 74 + 70 + -162 = $69 Mil.
Total Current Assets was $1,962 Mil.
Total Assets was $3,651 Mil.
Property, Plant and Equipment(Net PPE) was $198 Mil.
Depreciation, Depletion and Amortization(DDA) was $46 Mil.
Selling, General & Admin. Expense(SGA) was $180 Mil.
Total Current Liabilities was $1,516 Mil.
Long-Term Debt was $56 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(708 / 4158)||/||(699 / 5433)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(69 / 5433)||/||(200 / 4158)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (1790 + 165) / 4242)||/||(1 - (1962 + 198) / 3651)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(46 / (46 + 198))||/||(41 / (41 + 165))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(147 / 4158)||/||(180 / 5433)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((690 + 1550) / 4242)||/||((56 + 1516) / 3651)|
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|
|=||(68 - -1||-||140)||/||4242|
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 -2.82 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