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Kratos Defense & Security Solutions Inc (NAS:KTOS)
Beneish M-Score
-2.66 (As of Today)

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.

Kratos Defense & Security Solutions Inc has a M-score of -2.66 suggests that the company is not a manipulator.

KTOS' s 10-Year Beneish M-Score Range
Min: -6   Max: 1.94
Current: -2.66

-6
1.94

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.


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 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
=-2.66

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

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

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)
=(255.1 / 882.2) / (269 / 978)
=0.28916345 / 0.27505112
=1.0513

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)
=(56.4 / 978) / (53 / 882.2)
=0.25194274 / 0.25334391
=0.9945

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 - (376.7 + 82.6) / 1145.9) / (1 - (429.3 + 84.5) / 1224.7)
=0.59917968 / 0.58046869
=1.0322

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
=882.2 / 978
=0.902

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))
=0.39943141 / 0.33654618
=1.1869

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)
=0.20652913 / 0.20163599
=1.0243

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)
=0.77676935 / 0.73552707
=1.0561

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
=(-83.2 - -39.3 - -7.9) / 1145.9
=-0.0314

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.


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.

Kratos Defense & Security Solutions Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.08781.45790.58991.02680.84690.69761.31061.11580.81650.9967
GMI 0.98620.9751.27311.15650.80271.06950.92140.77051.00921.0511
AQI 1.83181.31871.26621.16920.91970.94361.05260.98460.97390.9965
SGI 1.29630.51421.00531.26451.47831.16881.22121.74761.35760.9808
DEPI 1.37241.30650.57451.13350.72050.80892.1090.78410.98621.0453
SGAI 0.72911.38361.07881.09890.61830.83460.98361.40411.01161.019
LVGI 1.28690.99231.33741.0971.07740.92661.37031.11091.0121.0175
TATA 0.0723-0.0146-0.1134-0.1077-0.3326-0.2806-0.0276-0.022-0.1319-0.0481
M-score -1.47-2.47-3.30-2.61-3.88-3.88-2.14-2.07-2.96-2.70

Kratos Defense & Security Solutions Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.99230.7650.81650.85830.8160.89830.99720.99291.20891.0513
GMI 0.82860.93031.00771.05561.05551.07541.05261.03761.0440.9945
AQI 0.98531.06610.97390.99481.08590.95820.99651.0150.99711.0322
SGI 1.58871.47921.35761.26471.21031.06420.98030.88630.86730.902
DEPI 0.63860.73860.98621.06731.06171.02961.04531.11831.2011.1869
SGAI 1.28751.13541.02110.95680.960.98781.01071.05711.04161.0243
LVGI 0.95870.95861.0121.00851.07591.09311.01751.01981.07271.0561
TATA -0.0452-0.0471-0.1319-0.1226-0.136-0.1222-0.0482-0.0502-0.0398-0.0314
M-score -2.35-2.54-2.96-2.91-3.04-3.09-2.70-2.80-2.58-2.66
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