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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 -2.17. The lowest was -2.44. And the median was -2.42.
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 * 0.8358||+||0.528 * 0.9763||+||0.404 * 0.9599||+||0.892 * 1.1676||+||0.115 * 2.7418|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0134||+||4.679 * -0.0202||-||0.327 * 1.0993|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $23 Mil.|
Revenue was 474.487 + 519.769 + 499.337 + 437.987 = $1,932 Mil.
Gross Profit was 240.228 + 250.819 + 251.227 + 201.499 = $944 Mil.
Total Current Assets was $731 Mil.
Total Assets was $1,603 Mil.
Property, Plant and Equipment(Net PPE) was $225 Mil.
Depreciation, Depletion and Amortization(DDA) was $47 Mil.
Selling, General & Admin. Expense(SGA) was $690 Mil.
Total Current Liabilities was $366 Mil.
Long-Term Debt was $136 Mil.
Net Income was 55.909 + 67 + 64.849 + 37.706 = $225 Mil.
Non Operating Income was -1.048 + -0.081 + -1.439 + -0.037 = $-3 Mil.
Cash Flow from Operations was 54.217 + 62.16 + 53.496 + 90.639 = $261 Mil.
|Accounts Receivable was $23 Mil.
Revenue was 419.984 + 456.625 + 407.339 + 370.437 = $1,654 Mil.
Gross Profit was 197.176 + 230.491 + 193.625 + 167.863 = $789 Mil.
Total Current Assets was $649 Mil.
Total Assets was $1,181 Mil.
Property, Plant and Equipment(Net PPE) was $36 Mil.
Depreciation, Depletion and Amortization(DDA) was $32 Mil.
Selling, General & Admin. Expense(SGA) was $583 Mil.
Total Current Liabilities was $336 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)|
|=||(22.685 / 1931.58)||/||(23.246 / 1654.385)|
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)|
|=||(250.819 / 1654.385)||/||(240.228 / 1931.58)|
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 - (731.141 + 225.375) / 1602.981)||/||(1 - (649.075 + 35.613) / 1180.765)|
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))|
|=||(31.947 / (31.947 + 35.613))||/||(46.971 / (46.971 + 225.375))|
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)|
|=||(689.753 / 1931.58)||/||(582.972 / 1654.385)|
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)|
|=||((135.817 + 365.624) / 1602.981)||/||((0 + 335.993) / 1180.765)|
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|
|=||(225.464 - -2.605||-||260.512)||/||1602.981|
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 -2.44 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