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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 Rockwell Automation Inc was -1.31. The lowest was -3.20. And the median was -2.60.
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 Rockwell Automation Inc 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 * 0.8771||+||0.528 * 0.9587||+||0.404 * 0.9913||+||0.892 * 1.0037||+||0.115 * 0.9348|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9939||+||4.679 * -0.0502||-||0.327 * 1.0494|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $1,060 Mil.|
Revenue was 1550.8 + 1574.4 + 1781.8 + 1649.5 = $6,557 Mil.
Gross Profit was 673.2 + 687.5 + 752.9 + 681.5 = $2,795 Mil.
Total Current Assets was $4,046 Mil.
Total Assets was $6,280 Mil.
Property, Plant and Equipment(Net PPE) was $598 Mil.
Depreciation, Depletion and Amortization(DDA) was $158 Mil.
Selling, General & Admin. Expense(SGA) was $1,562 Mil.
Total Current Liabilities was $1,279 Mil.
Long-Term Debt was $1,505 Mil.
Net Income was 206 + 214.2 + 248.7 + 199.7 = $869 Mil.
Non Operating Income was 1.4 + 1.8 + -1.1 + 1.3 = $3 Mil.
Cash Flow from Operations was 285.2 + 268.2 + 325.9 + 301.1 = $1,180 Mil.
|Accounts Receivable was $1,204 Mil.
Revenue was 1600.5 + 1591.7 + 1715.7 + 1624.2 = $6,532 Mil.
Gross Profit was 655.8 + 663.7 + 697.2 + 652.9 = $2,670 Mil.
Total Current Assets was $3,929 Mil.
Total Assets was $6,158 Mil.
Property, Plant and Equipment(Net PPE) was $610 Mil.
Depreciation, Depletion and Amortization(DDA) was $148 Mil.
Selling, General & Admin. Expense(SGA) was $1,565 Mil.
Total Current Liabilities was $1,697 Mil.
Long-Term Debt was $905 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)|
|=||(1060.3 / 6556.5)||/||(1204.4 / 6532.1)|
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)|
|=||(687.5 / 6532.1)||/||(673.2 / 6556.5)|
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 - (4046 + 598) / 6280.2)||/||(1 - (3929.4 + 610.3) / 6158.1)|
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))|
|=||(148.1 / (148.1 + 610.3))||/||(157.9 / (157.9 + 598))|
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)|
|=||(1561.5 / 6556.5)||/||(1565.3 / 6532.1)|
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)|
|=||((1505.4 + 1279.3) / 6280.2)||/||((905.4 + 1696.7) / 6158.1)|
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|
|=||(868.6 - 3.4||-||1180.4)||/||6280.2|
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.
Rockwell Automation Inc has a M-score of -2.87 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
Rockwell Automation Inc Annual Data
Rockwell Automation Inc Quarterly Data