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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 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Northeast Utilities was 0.00. The lowest was 0.00. And the median was 0.00.
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 *||+||0.528 *||+||0.404 *||+||0.892 *||+||0.115 *|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 *||+||4.679 *||-||0.327 *|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $1,183 Mil.|
Revenue was 2290.59 + 1777.729 + 1892.59 + 1635.862 = $7,597 Mil.
Gross Profit was 1173.615 + 1482.777 + 1140.612 + 1053.418 = $4,850 Mil.
Total Current Assets was $2,366 Mil.
Total Assets was $28,097 Mil.
Property, Plant and Equipment(Net PPE) was $17,713 Mil.
Depreciation, Depletion and Amortization(DDA) was $813 Mil.
Selling, General & Admin. Expense(SGA) was $435 Mil.
Total Current Liabilities was $2,790 Mil.
Long-Term Debt was $8,318 Mil.
Net Income was 235.957 + 177.397 + 209.501 + 171.021 = $794 Mil.
Non Operating Income was 1.667 + 51.549 + -8.945 + 4.944 = $49 Mil.
Cash Flow from Operations was 493.796 + 486.571 + 407.944 + 295.881 = $1,684 Mil.
|Accounts Receivable was $1,029 Mil.
Revenue was 1995.023 + 1683.952 + 1861.529 + 1628.684 = $7,169 Mil.
Gross Profit was 1141.443 + 1348.787 + 1160.452 + 1013.181 = $4,664 Mil.
Total Current Assets was $2,158 Mil.
Total Assets was $28,329 Mil.
Property, Plant and Equipment(Net PPE) was $16,738 Mil.
Depreciation, Depletion and Amortization(DDA) was $673 Mil.
Selling, General & Admin. Expense(SGA) was $0 Mil.
Total Current Liabilities was $3,840 Mil.
Long-Term Debt was $7,031 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)|
|=||(1182.9 / 7596.771)||/||(1028.859 / 7169.188)|
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)|
|=||(1482.777 / 7169.188)||/||(1173.615 / 7596.771)|
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 - (2365.809 + 17713.027) / 28096.87)||/||(1 - (2158.011 + 16737.549) / 28328.661)|
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))|
|=||(672.91 / (672.91 + 16737.549))||/||(812.929 / (812.929 + 17713.027))|
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)|
|=||(434.974 / 7596.771)||/||(0 / 7169.188)|
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)|
|=||((8318.332 + 2790.144) / 28096.87)||/||((7031.171 + 3839.637) / 28328.661)|
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|
|=||(793.876 - 49.215||-||1684.192)||/||28096.87|
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 signals that the company is likely to 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