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Southwest Airlines Co (NYSE:LUV)
Beneish M-Score
-2.64 (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 -2.64 suggests that the company is not a manipulator.

LUV' s Beneish M-Score Range Over the Past 10 Years
Min: -3.36   Max: 168.65
Current: -2.64

-3.36
168.65

During the past 13 years, the highest Beneish M-Score of Southwest Airlines Co was 168.65. The lowest was -3.36. And the median was -2.67.


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 * 1.0484+0.528 * 0.907+0.404 * 0.9766+0.892 * 1.0819+0.115 * 0.972
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0452+4.679 * -0.0415-0.327 * 1.0483
=-2.64

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

This Year (Jun16) TTM:Last Year (Jun15) TTM:
Accounts Receivable was $524 Mil.
Revenue was 5384 + 4826 + 4977 + 5318 = $20,505 Mil.
Gross Profit was 3833 + 3351 + 3565 + 3760 = $14,509 Mil.
Total Current Assets was $4,469 Mil.
Total Assets was $22,447 Mil.
Property, Plant and Equipment(Net PPE) was $16,294 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,111 Mil.
Selling, General & Admin. Expense(SGA) was $6,535 Mil.
Total Current Liabilities was $7,833 Mil.
Long-Term Debt was $2,536 Mil.
Net Income was 820 + 511 + 536 + 584 = $2,451 Mil.
Non Operating Income was 43 + -114 + -162 + -272 = $-505 Mil.
Cash Flow from Operations was 1112 + 1616 + 324 + 836 = $3,888 Mil.
Accounts Receivable was $462 Mil.
Revenue was 5111 + 4414 + 4628 + 4800 = $18,953 Mil.
Gross Profit was 3508 + 2963 + 2886 + 2806 = $12,163 Mil.
Total Current Assets was $4,596 Mil.
Total Assets was $21,075 Mil.
Property, Plant and Equipment(Net PPE) was $14,860 Mil.
Depreciation, Depletion and Amortization(DDA) was $983 Mil.
Selling, General & Admin. Expense(SGA) was $5,779 Mil.
Total Current Liabilities was $6,876 Mil.
Long-Term Debt was $2,411 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)
=(524 / 20505) / (462 / 18953)
=0.02555474 / 0.02437609
=1.0484

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)
=(12163 / 18953) / (14509 / 20505)
=0.64174537 / 0.70758352
=0.907

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 - (4469 + 16294) / 22447) / (1 - (4596 + 14860) / 21075)
=0.07502116 / 0.07682088
=0.9766

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
=20505 / 18953
=1.0819

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))
=(983 / (983 + 14860)) / (1111 / (1111 + 16294))
=0.06204633 / 0.06383223
=0.972

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)
=(6535 / 20505) / (5779 / 18953)
=0.31870276 / 0.30491215
=1.0452

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)
=((2536 + 7833) / 22447) / ((2411 + 6876) / 21075)
=0.46193255 / 0.44066429
=1.0483

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
=(2451 - -505 - 3888) / 22447
=-0.0415

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 -2.64 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 -0.06-0.14860.1273-0.0659-0.0644-0.0542-0.0981-0.0907-0.0739-0.0235
M-score -2.84-3.06-2.39-2.97-2.21-1.75-2.85-2.74-3.02-2.44

Southwest Airlines Co Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
DSRI 1.02930.82460.95810.82871.02990.98980.93921.2190.95421.0484
GMI 0.91470.89660.89910.90350.88120.87240.84890.84380.88030.907
AQI 1.0781.26561.07930.98350.86320.86891.01221.0381.01720.9766
SGI 1.03491.05471.0551.05111.06021.04421.05791.06531.07311.0819
DEPI 0.99241.00731.00730.98850.99580.98550.97281.00730.98960.972
SGAI 0.84560.83710.68121.25611.13611.16781.34451.00531.08641.0452
LVGI 1.0511.03451.01341.0660.99070.97711.04731.09451.08311.0483
TATA -0.0904-0.1038-0.087-0.0738-0.0663-0.022-0.0283-0.0236-0.0237-0.0415
M-score -2.85-3.01-2.85-3.06-2.85-2.70-2.77-2.43-2.67-2.64
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