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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 NorthWestern Corp was 9.92. The lowest was -4.74. And the median was -2.63.
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 NorthWestern 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 * 0.9103||+||0.528 * 0.9639||+||0.404 * 1.0115||+||0.892 * 1.0355||+||0.115 * 0.9433|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.981||+||4.679 * -0.0298||-||0.327 * 0.9832|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $116 Mil.|
Revenue was 293.12 + 332.539 + 324.989 + 272.739 = $1,223 Mil.
Gross Profit was 211.427 + 217.105 + 217.62 + 199.162 = $845 Mil.
Total Current Assets was $238 Mil.
Total Assets was $5,308 Mil.
Property, Plant and Equipment(Net PPE) was $4,110 Mil.
Depreciation, Depletion and Amortization(DDA) was $153 Mil.
Selling, General & Admin. Expense(SGA) was $307 Mil.
Total Current Liabilities was $521 Mil.
Long-Term Debt was $1,799 Mil.
Net Income was 35.569 + 38.054 + 45.013 + 23.798 = $142 Mil.
Non Operating Income was 1.195 + 3.102 + 2.154 + 3.769 = $10 Mil.
Cash Flow from Operations was -1.142 + 142.136 + 35.341 + 114.139 = $290 Mil.
|Accounts Receivable was $123 Mil.
Revenue was 270.56 + 346.011 + 312.947 + 251.912 = $1,181 Mil.
Gross Profit was 191.033 + 233.62 + 204.85 + 157.32 = $787 Mil.
Total Current Assets was $312 Mil.
Total Assets was $5,060 Mil.
Property, Plant and Equipment(Net PPE) was $3,843 Mil.
Depreciation, Depletion and Amortization(DDA) was $135 Mil.
Selling, General & Admin. Expense(SGA) was $302 Mil.
Total Current Liabilities was $510 Mil.
Long-Term Debt was $1,739 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)|
|=||(115.833 / 1223.387)||/||(122.888 / 1181.43)|
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)|
|=||(786.823 / 1181.43)||/||(845.314 / 1223.387)|
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 - (237.991 + 4109.73) / 5307.606)||/||(1 - (312.165 + 3843.234) / 5060.068)|
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))|
|=||(134.635 / (134.635 + 3843.234))||/||(152.944 / (152.944 + 4109.73))|
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)|
|=||(307.072 / 1223.387)||/||(302.28 / 1181.43)|
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)|
|=||((1799.087 + 520.676) / 5307.606)||/||((1739.389 + 510.022) / 5060.068)|
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|
|=||(142.434 - 10.22||-||290.474)||/||5307.606|
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.
NorthWestern Corp has a M-score of -2.68 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
NorthWestern Corp Annual Data
NorthWestern Corp Quarterly Data