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Southwest Airlines Co (NYSE:LUV)
Beneish M-Score
-2.14 (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 -2.14 signals that the company is a manipulator.

LUV' s Beneish M-Score Range Over the Past 10 Years
Min: -3.36   Max: 168.65
Current: -2.14

-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 -2.66.


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 * 1.7469+0.528 * 0.9558+0.404 * 0.9198+0.892 * 1.0439+0.115 * 0.9548
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2964+4.679 * -0.0588-0.327 * 0.9835
=-2.14

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $848 Mil.
Revenue was 5139 + 5384 + 4826 + 4977 = $20,326 Mil.
Gross Profit was 3577 + 3833 + 3351 + 3565 = $14,326 Mil.
Total Current Assets was $4,839 Mil.
Total Assets was $23,045 Mil.
Property, Plant and Equipment(Net PPE) was $16,546 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,168 Mil.
Selling, General & Admin. Expense(SGA) was $6,745 Mil.
Total Current Liabilities was $7,816 Mil.
Long-Term Debt was $2,323 Mil.
Net Income was 388 + 820 + 511 + 536 = $2,255 Mil.
Non Operating Income was -64 + 43 + -114 + -162 = $-297 Mil.
Cash Flow from Operations was 856 + 1112 + 1616 + 324 = $3,908 Mil.
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 $4,984 Mil.
Total Current Liabilities was $7,084 Mil.
Long-Term Debt was $2,381 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)
=(848 / 20326) / (465 / 19471)
=0.04171996 / 0.02388167
=1.7469

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)
=(13117 / 19471) / (14326 / 20326)
=0.67366853 / 0.70481157
=0.9558

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 - (4839 + 16546) / 23045) / (1 - (4573 + 14929) / 21159)
=0.07203298 / 0.07831183
=0.9198

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
=20326 / 19471
=1.0439

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))
=(1003 / (1003 + 14929)) / (1168 / (1168 + 16546))
=0.06295506 / 0.06593655
=0.9548

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)
=(6745 / 20326) / (4984 / 19471)
=0.33184099 / 0.25597042
=1.2964

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)
=((2323 + 7816) / 23045) / ((2381 + 7084) / 21159)
=0.43996529 / 0.44732738
=0.9835

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
=(2255 - -297 - 3908) / 23045
=-0.0588

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 -2.14 signals that the company is likely to 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 local exchange's currency.

Southwest Airlines Co Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.77971.06670.67010.86120.98661.18531.01741.21850.82871.219
GMI 1.05051.08670.6520.82591.29861.121.00780.93050.90340.8439
AQI 0.67961.52640.30210.74072.01882.25390.97590.89950.96021.0631
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 0.93180.97710.76051.10580.91330.91220.99561.02361.02671.1026
LVGI 0.8841.24111.07280.95450.95031.0581.00580.99140.98121.1469
TATA -0.06-0.15160.1252-0.0659-0.0644-0.0558-0.0981-0.0907-0.0721-0.0235
M-score -2.84-2.87-2.55-3.18-2.04-1.74-2.86-2.75-3.00-2.45

Southwest Airlines Co Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 0.82460.95810.82871.02990.98980.93921.2190.95421.04841.7469
GMI 0.89660.89910.90350.88120.87240.84890.84380.88030.9070.9558
AQI 1.26561.07930.96020.86320.86891.01221.06311.01720.97660.9198
SGI 1.05471.0551.05111.06021.04421.05791.06531.07311.08191.0439
DEPI 1.00731.00730.98850.99580.98550.97281.00730.98960.9720.9548
SGAI 1.41131.76740.92570.83660.86690.73361.3181.20831.1581.2964
LVGI 1.03451.01340.98120.99070.97711.04731.14691.08311.04830.9835
TATA -0.1038-0.087-0.0721-0.0663-0.022-0.0283-0.0236-0.0237-0.0415-0.0588
M-score -3.11-3.03-2.98-2.80-2.64-2.66-2.49-2.69-2.66-2.14
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