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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 7 years, the highest Beneish M-Score of Spirit Airlines Inc was -1.90. The lowest was -2.73. And the median was -2.44.
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 Spirit Airlines 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 * 0.7319||+||0.528 * 0.9111||+||0.404 * 0.6838||+||0.892 * 1.1252||+||0.115 * 5.7066|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0461||+||4.679 * -0.0681||-||0.327 * 1.4862|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $31 Mil.|
Revenue was 553.421 + 493.355 + 474.487 + 519.769 = $2,041 Mil.
Gross Profit was 317.752 + 278.435 + 240.228 + 250.819 = $1,087 Mil.
Total Current Assets was $872 Mil.
Total Assets was $2,105 Mil.
Property, Plant and Equipment(Net PPE) was $569 Mil.
Depreciation, Depletion and Amortization(DDA) was $57 Mil.
Selling, General & Admin. Expense(SGA) was $752 Mil.
Total Current Liabilities was $529 Mil.
Long-Term Debt was $399 Mil.
Net Income was 76.704 + 69.002 + 55.909 + 67 = $269 Mil.
Non Operating Income was -0.044 + -0.072 + -1.048 + -0.081 = $-1 Mil.
Cash Flow from Operations was 129.036 + 167.835 + 54.217 + 62.16 = $413 Mil.
|Accounts Receivable was $37 Mil.
Revenue was 499.337 + 437.987 + 419.984 + 456.625 = $1,814 Mil.
Gross Profit was 251.227 + 201.499 + 197.176 + 230.491 = $880 Mil.
Total Current Assets was $688 Mil.
Total Assets was $1,350 Mil.
Property, Plant and Equipment(Net PPE) was $38 Mil.
Depreciation, Depletion and Amortization(DDA) was $40 Mil.
Selling, General & Admin. Expense(SGA) was $639 Mil.
Total Current Liabilities was $401 Mil.
Long-Term Debt was $0 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)|
|=||(30.856 / 2041.032)||/||(37.467 / 1813.933)|
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)|
|=||(278.435 / 1813.933)||/||(317.752 / 2041.032)|
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 - (871.911 + 568.588) / 2105.337)||/||(1 - (688.461 + 37.993) / 1349.85)|
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))|
|=||(40.484 / (40.484 + 37.993))||/||(56.508 / (56.508 + 568.588))|
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)|
|=||(751.645 / 2041.032)||/||(638.545 / 1813.933)|
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)|
|=||((398.975 + 529.491) / 2105.337)||/||((0 + 400.538) / 1349.85)|
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|
|=||(268.615 - -1.245||-||413.248)||/||2105.337|
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.
Spirit Airlines Inc has a M-score of -2.73 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
Spirit Airlines Inc Annual Data
Spirit Airlines Inc Quarterly Data