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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 Norfolk Southern Corp was 0.83. The lowest was -3.16. And the median was -2.64.
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 Norfolk Southern Corp 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 * 1.0619||+||0.528 * 0.9416||+||0.404 * 1.0583||+||0.892 * 0.9407||+||0.115 * 1.0531|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0017||+||4.679 * -0.0409||-||0.327 * 1.0017|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $945 Mil.|
Revenue was 2490 + 2524 + 2454 + 2420 = $9,888 Mil.
Gross Profit was 1682 + 1769 + 1694 + 1698 = $6,843 Mil.
Total Current Assets was $2,291 Mil.
Total Assets was $34,892 Mil.
Property, Plant and Equipment(Net PPE) was $29,751 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,030 Mil.
Selling, General & Admin. Expense(SGA) was $2,743 Mil.
Total Current Liabilities was $2,339 Mil.
Long-Term Debt was $9,562 Mil.
Net Income was 416 + 460 + 405 + 387 = $1,668 Mil.
Non Operating Income was 12 + 29 + 4 + 16 = $61 Mil.
Cash Flow from Operations was 722 + 880 + 553 + 879 = $3,034 Mil.
|Accounts Receivable was $946 Mil.
Revenue was 2518 + 2713 + 2713 + 2567 = $10,511 Mil.
Gross Profit was 1631 + 1799 + 1785 + 1634 = $6,849 Mil.
Total Current Assets was $2,512 Mil.
Total Assets was $34,139 Mil.
Property, Plant and Equipment(Net PPE) was $28,992 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,059 Mil.
Selling, General & Admin. Expense(SGA) was $2,911 Mil.
Total Current Liabilities was $2,231 Mil.
Long-Term Debt was $9,393 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)|
|=||(945 / 9888)||/||(946 / 10511)|
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)|
|=||(6849 / 10511)||/||(6843 / 9888)|
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 - (2291 + 29751) / 34892)||/||(1 - (2512 + 28992) / 34139)|
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))|
|=||(1059 / (1059 + 28992))||/||(1030 / (1030 + 29751))|
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)|
|=||(2743 / 9888)||/||(2911 / 10511)|
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)|
|=||((9562 + 2339) / 34892)||/||((9393 + 2231) / 34139)|
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|
|=||(1668 - 61||-||3034)||/||34892|
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.
Norfolk Southern Corp has a M-score of -2.67 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
Norfolk Southern Corp Annual Data
Norfolk Southern Corp Quarterly Data