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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 6.61. The lowest was -4.75. And the median was -2.59.
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 * 0.9801||+||0.528 * 0.8391||+||0.404 * 0.8978||+||0.892 * 0.9928||+||0.115 * 1.2107|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0836||+||4.679 * -0.0415||-||0.327 * 1.0355|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $117 Mil.|
Revenue was 272.739 + 270.56 + 346.011 + 312.947 = $1,202 Mil.
Gross Profit was 199.162 + 191.033 + 233.62 + 204.85 = $829 Mil.
Total Current Assets was $316 Mil.
Total Assets was $5,235 Mil.
Property, Plant and Equipment(Net PPE) was $4,005 Mil.
Depreciation, Depletion and Amortization(DDA) was $140 Mil.
Selling, General & Admin. Expense(SGA) was $313 Mil.
Total Current Liabilities was $575 Mil.
Long-Term Debt was $1,809 Mil.
Net Income was 23.798 + 30.973 + 51.425 + 37.169 = $143 Mil.
Non Operating Income was 3.769 + 0.995 + 0.665 + 5.468 = $11 Mil.
Cash Flow from Operations was 114.139 + 63.537 + 126.801 + 45.073 = $350 Mil.
|Accounts Receivable was $121 Mil.
Revenue was 251.912 + 270.281 + 369.723 + 319.09 = $1,211 Mil.
Gross Profit was 157.32 + 157.807 + 202.295 + 182.951 = $700 Mil.
Total Current Assets was $320 Mil.
Total Assets was $3,874 Mil.
Property, Plant and Equipment(Net PPE) was $2,800 Mil.
Depreciation, Depletion and Amortization(DDA) was $119 Mil.
Selling, General & Admin. Expense(SGA) was $291 Mil.
Total Current Liabilities was $493 Mil.
Long-Term Debt was $1,211 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)|
|=||(117.454 / 1202.257)||/||(120.713 / 1211.006)|
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)|
|=||(191.033 / 1211.006)||/||(199.162 / 1202.257)|
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 - (315.836 + 4004.516) / 5235.078)||/||(1 - (320.48 + 2799.823) / 3874.298)|
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))|
|=||(119.285 / (119.285 + 2799.823))||/||(139.876 / (139.876 + 4004.516))|
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)|
|=||(313.468 / 1202.257)||/||(291.385 / 1211.006)|
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)|
|=||((1808.925 + 574.913) / 5235.078)||/||((1210.697 + 493.07) / 3874.298)|
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|
|=||(143.365 - 10.897||-||349.55)||/||5235.078|
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 -2.83 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