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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 4.54. The lowest was -2.80. And the median was -2.49.
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 * 0.8956||+||0.528 * 0.9753||+||0.404 * 0.9176||+||0.892 * 1.0436||+||0.115 * 1.2624|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0264||+||4.679 * -0.0281||-||0.327 * 1.0443|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $163 Mil.|
Revenue was 312.947 + 251.912 + 270.281 + 369.723 = $1,205 Mil.
Gross Profit was 204.85 + 157.32 + 157.807 + 202.295 = $722 Mil.
Total Current Assets was $351 Mil.
Total Assets was $4,974 Mil.
Property, Plant and Equipment(Net PPE) was $3,758 Mil.
Depreciation, Depletion and Amortization(DDA) was $124 Mil.
Selling, General & Admin. Expense(SGA) was $306 Mil.
Total Current Liabilities was $615 Mil.
Long-Term Debt was $1,690 Mil.
Net Income was 37.169 + 30.191 + 7.746 + 45.58 = $121 Mil.
Non Operating Income was 5.468 + -0.439 + 2.98 + 2.189 = $10 Mil.
Cash Flow from Operations was 45.073 + 80.404 + 12.327 + 112.235 = $250 Mil.
|Accounts Receivable was $175 Mil.
Revenue was 319.09 + 262.248 + 260.161 + 313.02 = $1,155 Mil.
Gross Profit was 182.951 + 157.95 + 153.248 + 180.824 = $675 Mil.
Total Current Assets was $321 Mil.
Total Assets was $3,715 Mil.
Property, Plant and Equipment(Net PPE) was $2,690 Mil.
Depreciation, Depletion and Amortization(DDA) was $113 Mil.
Selling, General & Admin. Expense(SGA) was $286 Mil.
Total Current Liabilities was $464 Mil.
Long-Term Debt was $1,185 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)|
|=||(163.479 / 1204.863)||/||(174.913 / 1154.519)|
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)|
|=||(157.32 / 1154.519)||/||(204.85 / 1204.863)|
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 - (350.885 + 3758.008) / 4973.943)||/||(1 - (320.956 + 2690.128) / 3715.26)|
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))|
|=||(112.831 / (112.831 + 2690.128))||/||(123.776 / (123.776 + 3758.008))|
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)|
|=||(305.886 / 1204.863)||/||(285.569 / 1154.519)|
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)|
|=||((1690.261 + 614.582) / 4973.943)||/||((1184.992 + 463.588) / 3715.26)|
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|
|=||(120.686 - 10.198||-||250.039)||/||4973.943|
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 -2.70 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