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Northeast Utilities (NYSE:NU)
Beneish M-Score
-3.29 (As of Today)

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.

Northeast Utilities has a M-score of -3.29 suggests that the company is not a manipulator.

NU' s 10-Year Beneish M-Score Range
Min: -3.29   Max: -3.29
Current: -3.29

During the past 13 years, the highest Beneish M-Score of Northeast Utilities was -3.29. The lowest was -3.29. And the median was -3.29.


Definition

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 Northeast Utilities 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 * 0.9572+0.528 * 1.0546+0.404 * 0.8526+0.892 * 1.0644+0.115 * 0.871
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 4.4264+4.679 * -0.0392-0.327 * 1.0351
=-3.29

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $1,001 Mil.
Revenue was 1677.614 + 2290.59 + 1777.729 + 1892.59 = $7,639 Mil.
Gross Profit was 950.692 + 1173.615 + 1482.777 + 1140.612 = $4,748 Mil.
Total Current Assets was $2,068 Mil.
Total Assets was $27,790 Mil.
Property, Plant and Equipment(Net PPE) was $17,979 Mil.
Depreciation, Depletion and Amortization(DDA) was $806 Mil.
Selling, General & Admin. Expense(SGA) was $444 Mil.
Total Current Liabilities was $2,803 Mil.
Long-Term Debt was $8,147 Mil.
Net Income was 127.367 + 235.957 + 177.397 + 209.501 = $750 Mil.
Non Operating Income was 5.526 + 1.667 + 51.549 + -8.945 = $50 Mil.
Cash Flow from Operations was 402.867 + 493.796 + 486.571 + 407.944 = $1,791 Mil.
Accounts Receivable was $983 Mil.
Revenue was 1635.862 + 1995.023 + 1683.952 + 1861.529 = $7,176 Mil.
Gross Profit was 1053.418 + 1141.443 + 1348.787 + 1160.452 = $4,704 Mil.
Total Current Assets was $2,051 Mil.
Total Assets was $28,197 Mil.
Property, Plant and Equipment(Net PPE) was $16,931 Mil.
Depreciation, Depletion and Amortization(DDA) was $657 Mil.
Selling, General & Admin. Expense(SGA) was $94 Mil.
Total Current Liabilities was $3,082 Mil.
Long-Term Debt was $7,651 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(1001.493 / 7638.523) / (982.944 / 7176.366)
=0.13111082 / 0.1369696
=0.9572

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1173.615 / 7176.366) / (950.692 / 7638.523)
=0.6554989 / 0.62154634
=1.0546

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (2068.475 + 17978.692) / 27790.445) / (1 - (2051.093 + 16931.448) / 28196.892)
=0.27863095 / 0.32678605
=0.8526

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=7638.523 / 7176.366
=1.0644

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))
=(656.962 / (656.962 + 16931.448)) / (805.583 / (805.583 + 17978.692))
=0.03735198 / 0.04288603
=0.871

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)
=(443.543 / 7638.523) / (94.142 / 7176.366)
=0.05806659 / 0.01311834
=4.4264

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)
=((8147.129 + 2802.808) / 27790.445) / ((7651.396 + 3081.51) / 28196.892)
=0.39401805 / 0.38064146
=1.0351

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(750.222 - 49.797 - 1791.178) / 27790.445
=-0.0392

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.

Northeast Utilities has a M-score of -3.29 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Northeast Utilities Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.8435
GMI 1.0119
AQI 0.8744
SGI 1.1638
DEPI 0.7835
SGAI 1.1029
LVGI 1.03
TATA -0.0326
M-score -2.73

Northeast Utilities Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.9572
GMI 1.0546
AQI 0.8526
SGI 1.0644
DEPI 0.871
SGAI 4.4264
LVGI 1.0351
TATA -0.0392
M-score -3.29
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