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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.
Northeast Utilities has a M-score of -2.81 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Northeast Utilities was -2.81. The lowest was -3.33. And the median was -3.07.
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 * 1.0137||+||0.528 * 0.9932||+||0.404 * 0.8391||+||0.892 * 1.0598||+||0.115 * 0.8106|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.5901||+||4.679 * -0.0408||-||0.327 * 1.0422|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $1,030 Mil.|
Revenue was 1892.532 + 1677.614 + 2290.59 + 1777.729 = $7,638 Mil.
Gross Profit was 1057.208 + 950.692 + 1173.615 + 1482.777 = $4,664 Mil.
Total Current Assets was $2,102 Mil.
Total Assets was $27,982 Mil.
Property, Plant and Equipment(Net PPE) was $18,255 Mil.
Depreciation, Depletion and Amortization(DDA) was $810 Mil.
Selling, General & Admin. Expense(SGA) was $337 Mil.
Total Current Liabilities was $2,930 Mil.
Long-Term Debt was $8,167 Mil.
Net Income was 234.614 + 127.367 + 235.957 + 177.397 = $775 Mil.
Non Operating Income was 11.86 + 5.526 + 1.667 + 8.239 = $27 Mil.
Cash Flow from Operations was 507.354 + 402.867 + 493.796 + 486.571 = $1,891 Mil.
|Accounts Receivable was $959 Mil.
Revenue was 1892.59 + 1635.862 + 1995.023 + 1683.952 = $7,207 Mil.
Gross Profit was 1140.612 + 1053.418 + 1141.443 + 1035.638 = $4,371 Mil.
Total Current Assets was $2,018 Mil.
Total Assets was $28,444 Mil.
Property, Plant and Equipment(Net PPE) was $17,188 Mil.
Depreciation, Depletion and Amortization(DDA) was $613 Mil.
Selling, General & Admin. Expense(SGA) was $200 Mil.
Total Current Liabilities was $3,378 Mil.
Long-Term Debt was $7,444 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)|
|=||(1029.794 / 7638.465)||/||(958.595 / 7207.427)|
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)|
|=||(950.692 / 7207.427)||/||(1057.208 / 7638.465)|
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 - (2101.55 + 18254.61) / 27982.311)||/||(1 - (2018.132 + 17187.896) / 28444.318)|
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))|
|=||(612.847 / (612.847 + 17187.896))||/||(809.688 / (809.688 + 18254.61))|
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)|
|=||(337.446 / 7638.465)||/||(200.239 / 7207.427)|
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)|
|=||((8166.985 + 2929.676) / 27982.311)||/||((7444.192 + 3378.43) / 28444.318)|
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|
|=||(775.335 - 27.292||-||1890.588)||/||27982.311|
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 -2.81 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
Northeast Utilities Annual Data
Northeast Utilities Quarterly Data