Switch to:
Southwest Airlines Co (NYSE:LUV)
Beneish M-Score
-2.86 (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 -2.86 suggests that the company is not a manipulator.

LUV' s 10-Year Beneish M-Score Range
Min: -3.62   Max: 169.07
Current: -2.86

-3.62
169.07

During the past 13 years, the highest Beneish M-Score of Southwest Airlines Co was 169.07. The lowest was -3.62. And the median was -2.69.


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 * 0.9581+0.528 * 0.8991+0.404 * 1.0793+0.892 * 1.055+0.115 * 1.0073
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7859+4.679 * -0.087-0.327 * 1.0134
=-2.86

* 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 $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 $5,757 Mil.
Total Current Liabilities was $6,446 Mil.
Long-Term Debt was $2,327 Mil.
Net Income was 329 + 465 + 152 + 212 = $1,158 Mil.
Non Operating Income was -66 + -3 + 53 + -26 = $-42 Mil.
Cash Flow from Operations was 240 + 1338 + 1119 + 289 = $2,986 Mil.
Accounts Receivable was $463 Mil.
Revenue was 4545 + 4643 + 4084 + 4173 = $17,445 Mil.
Gross Profit was 2442 + 2489 + 1977 + 2061 = $8,969 Mil.
Total Current Assets was $4,773 Mil.
Total Assets was $19,364 Mil.
Property, Plant and Equipment(Net PPE) was $13,203 Mil.
Depreciation, Depletion and Amortization(DDA) was $868 Mil.
Selling, General & Admin. Expense(SGA) was $6,943 Mil.
Total Current Liabilities was $5,546 Mil.
Long-Term Debt was $2,616 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)
=(468 / 18405) / (463 / 17445)
=0.02542787 / 0.02654056
=0.9581

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)
=(2980 / 17445) / (2806 / 18405)
=0.51413012 / 0.57185547
=0.8991

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 - (4985 + 13965) / 20539) / (1 - (4773 + 13203) / 19364)
=0.07736501 / 0.07167941
=1.0793

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
=18405 / 17445
=1.055

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))
=(868 / (868 + 13203)) / (911 / (911 + 13965))
=0.06168716 / 0.06123958
=1.0073

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)
=(5757 / 18405) / (6943 / 17445)
=0.31279544 / 0.39799369
=0.7859

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)
=((2327 + 6446) / 20539) / ((2616 + 5546) / 19364)
=0.42713861 / 0.42150382
=1.0134

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
=(1158 - -42 - 2986) / 20539
=-0.087

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 -2.86 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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.19840.67010.86120.98661.18531.01741.2185
GMI 0.97261.11211.08860.98521.121.00780.9305
AQI 4.59330.30730.72832.01882.25390.97590.8995
SGI 1.18251.11780.93891.16951.29361.09131.0358
DEPI 1.07980.94360.93990.97711.00660.89781.0197
SGAI 1.01011.15711.12040.91750.92910.9991.0208
LVGI 1.01591.09110.93850.95031.10110.96650.9914
TATA -0.08610.1273-0.0659-0.0644-0.0542-0.0981-0.0907
M-score -1.10-2.37-3.04-2.21-1.75-2.85-2.75

Southwest Airlines Co Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 1.02661.00381.01741.12571.0131.05081.21851.02930.82460.9581
GMI 1.04481.0030.97621.00961.01460.99130.96040.91470.89660.8991
AQI 0.84161.03680.97590.94540.87220.84860.89951.0781.26561.0793
SGI 1.2571.16091.09141.03841.01071.02471.03581.03491.05471.055
DEPI 0.88010.89810.89780.97040.97210.98351.01860.99241.00731.0073
SGAI 0.92350.77011.33651.261.2041.43090.86010.86510.84820.7859
LVGI 0.96810.88280.96650.98360.996710.99141.0511.03451.0134
TATA -0.0563-0.1054-0.0981-0.078-0.1109-0.0992-0.0908-0.0904-0.1038-0.087
M-score -2.52-2.74-2.92-2.75-3.06-3.02-2.70-2.85-3.01-2.86
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK