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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.
NRG Energy Inc has a M-score of -2.38 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of NRG Energy Inc was 1.69. The lowest was -3.83. And the median was -2.40.
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 NRG Energy Inc 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 * 0.9002||+||0.528 * 0.9661||+||0.404 * 1.0718||+||0.892 * 1.4241||+||0.115 * 1.0441|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7289||+||4.679 * -0.051||-||0.327 * 1.0345|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $2,096 Mil.|
Revenue was 3621 + 3486 + 2795 + 3490 = $13,392 Mil.
Gross Profit was 804 + 753 + 853 + 1135 = $3,545 Mil.
Total Current Assets was $7,757 Mil.
Total Assets was $37,629 Mil.
Property, Plant and Equipment(Net PPE) was $21,576 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,344 Mil.
Selling, General & Admin. Expense(SGA) was $956 Mil.
Total Current Liabilities was $4,746 Mil.
Long-Term Debt was $18,165 Mil.
Net Income was -97 + -56 + -312 + 124 = $-341 Mil.
Non Operating Income was -21 + -23 + -94 + -1 = $-139 Mil.
Cash Flow from Operations was -21 + 391 + 447 + 901 = $1,718 Mil.
|Accounts Receivable was $1,635 Mil.
Revenue was 2929 + 2081 + 2063 + 2331 = $9,404 Mil.
Gross Profit was 878 + 328 + 594 + 605 = $2,405 Mil.
Total Current Assets was $6,943 Mil.
Total Assets was $34,492 Mil.
Property, Plant and Equipment(Net PPE) was $20,454 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,334 Mil.
Selling, General & Admin. Expense(SGA) was $921 Mil.
Total Current Liabilities was $4,411 Mil.
Long-Term Debt was $15,889 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)|
|=||(2096 / 13392)||/||(1635 / 9404)|
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)|
|=||(753 / 9404)||/||(804 / 13392)|
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 - (7757 + 21576) / 37629)||/||(1 - (6943 + 20454) / 34492)|
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))|
|=||(1334 / (1334 + 20454))||/||(1344 / (1344 + 21576))|
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)|
|=||(956 / 13392)||/||(921 / 9404)|
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)|
|=||((18165 + 4746) / 37629)||/||((15889 + 4411) / 34492)|
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|
|=||(-341 - -139||-||1718)||/||37629|
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.
NRG Energy Inc has a M-score of -2.38 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
NRG Energy Inc Annual Data
NRG Energy Inc Quarterly Data