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Southwest Airlines Co (NYSE:LUV)
Beneish M-Score
-2.78 (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.

Southwest Airlines Co has a M-score of -2.78 suggests that the company is not a manipulator.

LUV' s Beneish M-Score Range Over the Past 10 Years
Min: -3.55   Max: 168.88
Current: -2.78

-3.55
168.88

During the past 13 years, the highest Beneish M-Score of Southwest Airlines Co was 168.88. The lowest was -3.55. And the median was -2.70.


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 Southwest Airlines Co 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 * 0.9392+0.528 * 0.8489+0.404 * 1.0122+0.892 * 1.0579+0.115 * 0.9728
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.4148+4.679 * -0.0283-0.327 * 1.0473
=-2.78

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

This Year (Sep15) TTM:Last Year (Sep14) TTM:
Accounts Receivable was $465 Mil.
Revenue was 5318 + 5111 + 4414 + 4628 = $19,471 Mil.
Gross Profit was 3760 + 3508 + 2963 + 2886 = $13,117 Mil.
Total Current Assets was $4,573 Mil.
Total Assets was $21,159 Mil.
Property, Plant and Equipment(Net PPE) was $14,929 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,003 Mil.
Selling, General & Admin. Expense(SGA) was $6,942 Mil.
Total Current Liabilities was $7,084 Mil.
Long-Term Debt was $2,381 Mil.
Net Income was 584 + 608 + 453 + 190 = $1,835 Mil.
Non Operating Income was -272 + -88 + -32 + -293 = $-685 Mil.
Cash Flow from Operations was 836 + 627 + 1452 + 204 = $3,119 Mil.
Accounts Receivable was $468 Mil.
Revenue was 4800 + 5011 + 4166 + 4428 = $18,405 Mil.
Gross Profit was 2806 + 2980 + 2255 + 2484 = $10,525 Mil.
Total Current Assets was $4,985 Mil.
Total Assets was $20,539 Mil.
Property, Plant and Equipment(Net PPE) was $13,965 Mil.
Depreciation, Depletion and Amortization(DDA) was $911 Mil.
Selling, General & Admin. Expense(SGA) was $4,638 Mil.
Total Current Liabilities was $6,446 Mil.
Long-Term Debt was $2,327 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)
=(465 / 19471) / (468 / 18405)
=0.02388167 / 0.02542787
=0.9392

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)
=(3508 / 18405) / (3760 / 19471)
=0.57185547 / 0.67366853
=0.8489

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 - (4573 + 14929) / 21159) / (1 - (4985 + 13965) / 20539)
=0.07831183 / 0.07736501
=1.0122

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
=19471 / 18405
=1.0579

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))
=(911 / (911 + 13965)) / (1003 / (1003 + 14929))
=0.06123958 / 0.06295506
=0.9728

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)
=(6942 / 19471) / (4638 / 18405)
=0.35653022 / 0.25199674
=1.4148

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)
=((2381 + 7084) / 21159) / ((2327 + 6446) / 20539)
=0.44732738 / 0.42713861
=1.0473

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
=(1835 - -685 - 3119) / 21159
=-0.0283

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.

Southwest Airlines Co has a M-score of -2.78 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.

Southwest Airlines Co Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.77971.06670.67010.86120.98661.18531.01741.21850.82871.219
GMI 1.05050.63710.98951.22350.98521.121.00780.93050.90340.8439
AQI 0.67961.52640.30730.72832.01882.25390.97590.89950.98351.038
SGI 1.1981.08531.11780.93891.16951.29361.09131.03581.05121.0653
DEPI 0.9980.99970.94360.93990.97711.00660.89781.01970.98751.0082
SGAI 0.93180.79910.92991.10580.91330.91220.99561.02361.02671.1026
LVGI 0.8841.24111.09110.93850.95031.10110.96650.95621.0661.0945
TATA -0.0814-0.14860.1273-0.0659-0.0644-0.0542-0.0981-0.0907-0.0739-0.0235
M-score -2.94-3.06-2.39-2.97-2.21-1.75-2.85-2.74-3.02-2.44

Southwest Airlines Co Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
DSRI 1.05081.21851.02930.82460.95810.82871.02990.98980.93921.219
GMI 0.96020.93040.91470.89660.89910.90350.88120.87240.84890.8438
AQI 0.84860.89951.0781.26561.07930.98350.86320.86891.01221.038
SGI 1.02471.03581.03491.05471.0551.05111.06021.04421.05791.0653
DEPI 0.98351.01860.99241.00731.00730.98850.99580.98550.97281.0073
SGAI 1.67890.92120.85310.84390.69571.23311.21551.24581.41481.0269
LVGI 10.95621.0511.03451.01341.0660.99070.97711.04731.0945
TATA -0.0992-0.0908-0.0904-0.1038-0.087-0.0738-0.0663-0.022-0.0283-0.0236
M-score -3.08-2.72-2.85-3.01-2.85-3.06-2.86-2.71-2.78-2.43
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