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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 * 1.0323||+||0.528 * 0.958||+||0.404 * 0.931||+||0.892 * 0.9044||+||0.115 * 0.9474|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0476||+||4.679 * -0.0375||-||0.327 * 1.0194|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $985 Mil.|
Revenue was 2454 + 2420 + 2518 + 2713 = $10,105 Mil.
Gross Profit was 1694 + 1698 + 1631 + 1799 = $6,822 Mil.
Total Current Assets was $2,239 Mil.
Total Assets was $34,334 Mil.
Property, Plant and Equipment(Net PPE) was $29,387 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,076 Mil.
Selling, General & Admin. Expense(SGA) was $2,794 Mil.
Total Current Liabilities was $2,107 Mil.
Long-Term Debt was $9,549 Mil.
Net Income was 405 + 387 + 361 + 452 = $1,605 Mil.
Non Operating Income was 4 + 16 + 24 + 39 = $83 Mil.
Cash Flow from Operations was 553 + 879 + 698 + 678 = $2,808 Mil.
|Accounts Receivable was $1,055 Mil.
Revenue was 2713 + 2567 + 2870 + 3023 = $11,173 Mil.
Gross Profit was 1785 + 1634 + 1845 + 1962 = $7,226 Mil.
Total Current Assets was $2,413 Mil.
Total Assets was $33,310 Mil.
Property, Plant and Equipment(Net PPE) was $28,075 Mil.
Depreciation, Depletion and Amortization(DDA) was $972 Mil.
Selling, General & Admin. Expense(SGA) was $2,949 Mil.
Total Current Liabilities was $2,203 Mil.
Long-Term Debt was $8,890 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)|
|=||(985 / 10105)||/||(1055 / 11173)|
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)|
|=||(7226 / 11173)||/||(6822 / 10105)|
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 - (2239 + 29387) / 34334)||/||(1 - (2413 + 28075) / 33310)|
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))|
|=||(972 / (972 + 28075))||/||(1076 / (1076 + 29387))|
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)|
|=||(2794 / 10105)||/||(2949 / 11173)|
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)|
|=||((9549 + 2107) / 34334)||/||((8890 + 2203) / 33310)|
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|
|=||(1605 - 83||-||2808)||/||34334|
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 -2.78 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