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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 12 years, the highest Beneish M-Score of KBR Inc was -1.74. The lowest was -8.03. 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 * 0.9089||+||0.528 * -5.6613||+||0.404 * 0.8691||+||0.892 * 0.8825||+||0.115 * 0.6238|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0921||+||4.679 * -0.3451||-||0.327 * 1.3616|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $847 Mil.|
Revenue was 1417 + 1657 + 1659 + 1633 = $6,366 Mil.
Gross Profit was -162 + 30 + 28 + 39 = $-65 Mil.
Total Current Assets was $2,544 Mil.
Total Assets was $4,199 Mil.
Property, Plant and Equipment(Net PPE) was $247 Mil.
Depreciation, Depletion and Amortization(DDA) was $72 Mil.
Selling, General & Admin. Expense(SGA) was $239 Mil.
Total Current Liabilities was $2,024 Mil.
Long-Term Debt was $63 Mil.
Net Income was -1241 + 30 + -8 + -43 = $-1,262 Mil.
Non Operating Income was -2 + 31 + -5 + -7 = $17 Mil.
Cash Flow from Operations was -8 + 158 + 37 + -17 = $170 Mil.
|Accounts Receivable was $1,056 Mil.
Revenue was 1680 + 1755 + 1950 + 1829 = $7,214 Mil.
Gross Profit was 7 + 114 + 140 + 156 = $417 Mil.
Total Current Assets was $2,925 Mil.
Total Assets was $5,438 Mil.
Property, Plant and Equipment(Net PPE) was $415 Mil.
Depreciation, Depletion and Amortization(DDA) was $68 Mil.
Selling, General & Admin. Expense(SGA) was $248 Mil.
Total Current Liabilities was $1,907 Mil.
Long-Term Debt was $78 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(847 / 6366)||/||(1056 / 7214)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(30 / 7214)||/||(-162 / 6366)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (2544 + 247) / 4199)||/||(1 - (2925 + 415) / 5438)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(68 / (68 + 415))||/||(72 / (72 + 247))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(239 / 6366)||/||(248 / 7214)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((63 + 2024) / 4199)||/||((78 + 1907) / 5438)|
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|
|=||(-1262 - 17||-||170)||/||4199|
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 -8.03 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