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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 8 years, the highest Beneish M-Score of Spirit Airlines Inc was -1.87. The lowest was -2.98. And the median was -2.50.
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 * 1.2129||+||0.528 * 0.8649||+||0.404 * 0.6352||+||0.892 * 1.0862||+||0.115 * 1.3349|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1102||+||4.679 * -0.0751||-||0.327 * 1.0805|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $41 Mil.|
Revenue was 584.133 + 538.143 + 519.846 + 574.841 = $2,217 Mil.
Gross Profit was 360.506 + 344.212 + 311.406 + 349.367 = $1,365 Mil.
Total Current Assets was $1,184 Mil.
Total Assets was $3,030 Mil.
Property, Plant and Equipment(Net PPE) was $1,239 Mil.
Depreciation, Depletion and Amortization(DDA) was $90 Mil.
Selling, General & Admin. Expense(SGA) was $513 Mil.
Total Current Liabilities was $608 Mil.
Long-Term Debt was $836 Mil.
Net Income was 73.084 + 61.92 + 74.4 + 97.114 = $307 Mil.
Non Operating Income was -0.157 + -0.07 + 0.267 + -0.166 = $-0 Mil.
Cash Flow from Operations was 102.722 + 258.099 + 106.703 + 66.648 = $534 Mil.
|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 $425 Mil.
Total Current Liabilities was $529 Mil.
Long-Term Debt was $399 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)|
|=||(40.65 / 2216.963)||/||(30.856 / 2041.032)|
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)|
|=||(1087.234 / 2041.032)||/||(1365.491 / 2216.963)|
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 - (1183.779 + 1238.628) / 3030.2)||/||(1 - (871.911 + 568.588) / 2105.337)|
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))|
|=||(56.508 / (56.508 + 568.588))||/||(89.972 / (89.972 + 1238.628))|
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)|
|=||(512.811 / 2216.963)||/||(425.238 / 2041.032)|
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)|
|=||((836.418 + 607.545) / 3030.2)||/||((398.975 + 529.491) / 2105.337)|
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|
|=||(306.518 - -0.126||-||534.172)||/||3030.2|
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.
Spirit Airlines Inc has a M-score of -2.78 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