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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.
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.
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|
|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
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)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(2980 / 17445)||/||(2806 / 18405)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|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)|
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.
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))|
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)|
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)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(1158 - -42||-||2986)||/||20539|
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.
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
Southwest Airlines Co Annual Data
Southwest Airlines Co Quarterly Data