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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 1.94. The lowest was -4.29. And the median was -2.62.
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 * 1.0335||+||0.528 * 0.9662||+||0.404 * 0.9197||+||0.892 * 0.9011||+||0.115 * 0.9485|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0762||+||4.679 * -0.0471||-||0.327 * 1.0343|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $961 Mil.|
Revenue was 2420 + 2518 + 2713 + 2713 = $10,364 Mil.
Gross Profit was 1698 + 1631 + 1799 + 1785 = $6,913 Mil.
Total Current Assets was $1,966 Mil.
Total Assets was $33,785 Mil.
Property, Plant and Equipment(Net PPE) was $29,135 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,066 Mil.
Selling, General & Admin. Expense(SGA) was $2,851 Mil.
Total Current Liabilities was $1,831 Mil.
Long-Term Debt was $9,398 Mil.
Net Income was 387 + 361 + 452 + 433 = $1,633 Mil.
Non Operating Income was 16 + 24 + 39 + 19 = $98 Mil.
Cash Flow from Operations was 879 + 698 + 706 + 842 = $3,125 Mil.
|Accounts Receivable was $1,032 Mil.
Revenue was 2567 + 2870 + 3023 + 3042 = $11,502 Mil.
Gross Profit was 1634 + 1845 + 1962 + 1972 = $7,413 Mil.
Total Current Assets was $2,115 Mil.
Total Assets was $32,775 Mil.
Property, Plant and Equipment(Net PPE) was $27,829 Mil.
Depreciation, Depletion and Amortization(DDA) was $964 Mil.
Selling, General & Admin. Expense(SGA) was $2,940 Mil.
Total Current Liabilities was $2,103 Mil.
Long-Term Debt was $8,429 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)|
|=||(961 / 10364)||/||(1032 / 11502)|
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)|
|=||(1631 / 11502)||/||(1698 / 10364)|
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 - (1966 + 29135) / 33785)||/||(1 - (2115 + 27829) / 32775)|
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))|
|=||(964 / (964 + 27829))||/||(1066 / (1066 + 29135))|
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)|
|=||(2851 / 10364)||/||(2940 / 11502)|
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)|
|=||((9398 + 1831) / 33785)||/||((8429 + 2103) / 32775)|
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|
|=||(1633 - 98||-||3125)||/||33785|
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 -2.84 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