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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.
During the past 13 years, the highest Beneish M-Score of NRG Energy Inc was 1.39. The lowest was -3.98. And the median was -2.42.
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 * 0.9943||+||0.528 * 0.8468||+||0.404 * 0.8165||+||0.892 * 0.8684||+||0.115 * 0.8941|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.3044||+||4.679 * -0.2361||-||0.327 * 1.1565|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $1,018 Mil.|
Revenue was 3229 + 3020 + 4431 + 3397 = $14,077 Mil.
Gross Profit was 1040 + 795 + 1397 + 963 = $4,195 Mil.
Total Current Assets was $7,346 Mil.
Total Assets was $32,680 Mil.
Property, Plant and Equipment(Net PPE) was $18,763 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,617 Mil.
Selling, General & Admin. Expense(SGA) was $1,212 Mil.
Total Current Liabilities was $4,338 Mil.
Long-Term Debt was $18,677 Mil.
Net Income was 82 + -6314 + 66 + -14 = $-6,180 Mil.
Non Operating Income was -124 + 27 + 26 + 5 = $-66 Mil.
Cash Flow from Operations was 554 + -83 + 934 + 198 = $1,603 Mil.
|Accounts Receivable was $1,179 Mil.
Revenue was 3829 + 4192 + 4569 + 3621 = $16,211 Mil.
Gross Profit was 766 + 1241 + 1291 + 793 = $4,091 Mil.
Total Current Assets was $8,122 Mil.
Total Assets was $40,330 Mil.
Property, Plant and Equipment(Net PPE) was $22,276 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,701 Mil.
Selling, General & Admin. Expense(SGA) was $1,070 Mil.
Total Current Liabilities was $4,509 Mil.
Long-Term Debt was $20,050 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)|
|=||(1018 / 14077)||/||(1179 / 16211)|
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)|
|=||(4091 / 16211)||/||(4195 / 14077)|
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 - (7346 + 18763) / 32680)||/||(1 - (8122 + 22276) / 40330)|
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))|
|=||(1701 / (1701 + 22276))||/||(1617 / (1617 + 18763))|
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)|
|=||(1212 / 14077)||/||(1070 / 16211)|
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)|
|=||((18677 + 4338) / 32680)||/||((20050 + 4509) / 40330)|
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|
|=||(-6180 - -66||-||1603)||/||32680|
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 -3.98 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