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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 1.36. The lowest was -3.60. 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 * 0.8768||+||0.528 * 0.921||+||0.404 * 0.9934||+||0.892 * 1.095||+||0.115 * 0.8375|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1201||+||4.679 * -0.0457||-||0.327 * 0.9804|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $1,492 Mil.|
Revenue was 4431 + 3397 + 3826 + 4192 = $15,846 Mil.
Gross Profit was 1397 + 963 + 764 + 1256 = $4,380 Mil.
Total Current Assets was $8,073 Mil.
Total Assets was $39,988 Mil.
Property, Plant and Equipment(Net PPE) was $21,985 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,726 Mil.
Selling, General & Admin. Expense(SGA) was $1,191 Mil.
Total Current Liabilities was $4,336 Mil.
Long-Term Debt was $19,598 Mil.
Net Income was 66 + -14 + -120 + 119 = $51 Mil.
Non Operating Income was 26 + 5 + 16 + 44 = $91 Mil.
Cash Flow from Operations was 934 + 198 + 260 + 396 = $1,788 Mil.
|Accounts Receivable was $1,554 Mil.
Revenue was 4569 + 3621 + 3486 + 2795 = $14,471 Mil.
Gross Profit was 1291 + 793 + 749 + 851 = $3,684 Mil.
Total Current Assets was $7,872 Mil.
Total Assets was $40,069 Mil.
Property, Plant and Equipment(Net PPE) was $22,181 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,440 Mil.
Selling, General & Admin. Expense(SGA) was $971 Mil.
Total Current Liabilities was $4,543 Mil.
Long-Term Debt was $19,919 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)|
|=||(1492 / 15846)||/||(1554 / 14471)|
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)|
|=||(963 / 14471)||/||(1397 / 15846)|
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 - (8073 + 21985) / 39988)||/||(1 - (7872 + 22181) / 40069)|
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))|
|=||(1440 / (1440 + 22181))||/||(1726 / (1726 + 21985))|
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)|
|=||(1191 / 15846)||/||(971 / 14471)|
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)|
|=||((19598 + 4336) / 39988)||/||((19919 + 4543) / 40069)|
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|
|=||(51 - 91||-||1788)||/||39988|
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 -2.80 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