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KBR Inc (NYSE:KBR)
Beneish M-Score
6.03 (As of Today)

Warning Sign:

Beneish M-Score 6.03 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.

KBR Inc has a M-score of 6.03 signals that the company is a manipulator.

KBR' s 10-Year Beneish M-Score Range
Min: -10.74   Max: 6.03
Current: 6.03

-10.74
6.03

During the past 13 years, the highest Beneish M-Score of KBR Inc was 6.03. The lowest was -10.74. And the median was -2.50.


Definition

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 * 1.0079+0.528 * 20.1626+0.404 * 0.9322+0.892 * 0.8766+0.115 * 0.763
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8982+4.679 * -0.2998-0.327 * 1.2117
=6.03

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

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 + 1617 + 1811 = $6,720 Mil.
Gross Profit was 28 + 39 + -23 + 232 = $276 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 $254 Mil.
Total Current Liabilities was $1,910 Mil.
Long-Term Debt was $74 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

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 / 6720)
=0.1442879 / 0.14315476
=1.0079

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(70 / 6720) / (74 / 5891)
=0.04107143 / 0.00203701
=20.1626

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

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)
=0.37650445 / 0.40387874
=0.9322

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=5891 / 6720
=0.8766

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))
=0.14777328 / 0.19366197
=0.763

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) / (254 / 6720)
=0.03395009 / 0.03779762
=0.8982

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)
=0.4526426 / 0.3735643
=1.2117

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-1105 - 30 - 11) / 3822
=-0.2998

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 6.03 signals that the company is likely to be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

KBR Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.85070.49931.06870.90641.40310.91961.13960.96670.9116
GMI 1.3290.60750.90491.05080.76460.94921.02021.0587-7.813
AQI 0.79810.9421.4281.05881.23350.97980.91021.27920.8846
SGI 0.94390.90781.32431.04520.83430.9170.85530.91950.8741
DEPI 1.28440.55510.94250.92731.20890.95281.09231.01470.6238
SGAI 1.34622.30510.74510.9311.1711.10081.21291.21991.0981
LVGI 0.85080.91441.02590.83161.00740.9650.97910.8441.4384
TATA -0.14040.01330.03450.0618-0.0399-0.05830.001-0.0105-0.3451
M-score -3.21-3.44-1.81-2.13-2.48-2.95-2.52-2.47-9.19

KBR Inc Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
DSRI 1.33621.17420.87950.96670.80350.90211.05720.91161.00911.0079
GMI 0.97310.94930.99651.05871.44652.19398.2698-7.813-11.158520.1626
AQI 0.88421.01891.09841.27921.33361.20011.20570.88460.91520.9322
SGI 0.870.90250.92410.91950.90720.87130.87170.87410.87420.8766
DEPI 1.08181.14791.04241.01470.96490.93080.91650.62380.6630.763
SGAI 1.11871.16371.21371.21991.29361.26751.17581.09810.97040.8982
LVGI 0.96410.89330.82050.8440.9361.05331.07291.43841.36431.2117
TATA -0.00160.00610.0009-0.0105-0.0494-0.074-0.0745-0.3451-0.3307-0.2998
M-score -2.35-2.37-2.59-2.47-2.64-2.390.97-9.19-10.746.03
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