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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 Kratos Defense & Security Solutions Inc was 1.94. The lowest was -6.00. And the median was -2.54.
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 Kratos Defense & Security Solutions 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 * 1.0513||+||0.528 * 0.9945||+||0.404 * 1.0322||+||0.892 * 0.902||+||0.115 * 1.1869|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0243||+||4.679 * -0.0314||-||0.327 * 1.0561|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $255.1 Mil.|
Revenue was 217.1 + 229.3 + 200.1 + 235.7 = $882.2 Mil.
Gross Profit was 53 + 56.4 + 52.6 + 61.5 = $223.5 Mil.
Total Current Assets was $376.7 Mil.
Total Assets was $1,145.9 Mil.
Property, Plant and Equipment(Net PPE) was $82.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $41.9 Mil.
Selling, General & Admin. Expense(SGA) was $182.2 Mil.
Total Current Liabilities was $227.2 Mil.
Long-Term Debt was $662.9 Mil.
Net Income was -10.9 + -49.9 + -15 + -7.4 = $-83.2 Mil.
Non Operating Income was -0.4 + -38.9 + 0.2 + -0.2 = $-39.3 Mil.
Cash Flow from Operations was -7.9 + -11.5 + 1.2 + 10.3 = $-7.9 Mil.
|Accounts Receivable was $269.0 Mil.
Revenue was 226.4 + 235.2 + 252.8 + 263.6 = $978.0 Mil.
Gross Profit was 52.3 + 60.4 + 65.7 + 68 = $246.4 Mil.
Total Current Assets was $429.3 Mil.
Total Assets was $1,224.7 Mil.
Property, Plant and Equipment(Net PPE) was $84.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $56.2 Mil.
Selling, General & Admin. Expense(SGA) was $197.2 Mil.
Total Current Liabilities was $256.2 Mil.
Long-Term Debt was $644.6 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)|
|=||(255.1 / 882.2)||/||(269 / 978)|
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)|
|=||(56.4 / 978)||/||(53 / 882.2)|
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 - (376.7 + 82.6) / 1145.9)||/||(1 - (429.3 + 84.5) / 1224.7)|
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))|
|=||(56.2 / (56.2 + 84.5))||/||(41.9 / (41.9 + 82.6))|
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)|
|=||(182.2 / 882.2)||/||(197.2 / 978)|
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)|
|=||((662.9 + 227.2) / 1145.9)||/||((644.6 + 256.2) / 1224.7)|
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|
|=||(-83.2 - -39.3||-||-7.9)||/||1145.9|
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.
Kratos Defense & Security Solutions Inc has a M-score of -2.66 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
Kratos Defense & Security Solutions Inc Annual Data
Kratos Defense & Security Solutions Inc Quarterly Data