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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 -2.07. The lowest was -2.98. 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 * 1.0503||+||0.528 * 0.8491||+||0.404 * 0.6941||+||0.892 * 1.1003||+||0.115 * 1.417|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1141||+||4.679 * -0.091||-||0.327 * 1.0967|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $32 Mil.|
Revenue was 538.143 + 519.846 + 574.841 + 553.421 = $2,186 Mil.
Gross Profit was 344.212 + 311.406 + 349.367 + 317.752 = $1,323 Mil.
Total Current Assets was $1,069 Mil.
Total Assets was $2,763 Mil.
Property, Plant and Equipment(Net PPE) was $1,049 Mil.
Depreciation, Depletion and Amortization(DDA) was $82 Mil.
Selling, General & Admin. Expense(SGA) was $495 Mil.
Total Current Liabilities was $568 Mil.
Long-Term Debt was $655 Mil.
Net Income was 61.92 + 74.4 + 97.114 + 76.704 = $310 Mil.
Non Operating Income was -0.07 + 0.267 + -0.166 + -0.044 = $-0 Mil.
Cash Flow from Operations was 258.099 + 106.703 + 69.411 + 127.336 = $562 Mil.
|Accounts Receivable was $28 Mil.
Revenue was 493.355 + 474.487 + 519.769 + 499.337 = $1,987 Mil.
Gross Profit was 278.435 + 240.228 + 250.819 + 251.227 = $1,021 Mil.
Total Current Assets was $856 Mil.
Total Assets was $1,956 Mil.
Property, Plant and Equipment(Net PPE) was $442 Mil.
Depreciation, Depletion and Amortization(DDA) was $51 Mil.
Selling, General & Admin. Expense(SGA) was $403 Mil.
Total Current Liabilities was $486 Mil.
Long-Term Debt was $303 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)|
|=||(32.469 / 2186.251)||/||(28.097 / 1986.948)|
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)|
|=||(1020.709 / 1986.948)||/||(1322.737 / 2186.251)|
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 - (1069.314 + 1048.907) / 2763.248)||/||(1 - (856.073 + 442.005) / 1955.856)|
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))|
|=||(50.713 / (50.713 + 442.005))||/||(82.154 / (82.154 + 1048.907))|
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)|
|=||(494.575 / 2186.251)||/||(403.451 / 1986.948)|
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)|
|=||((655.103 + 567.596) / 2763.248)||/||((302.8 + 486.297) / 1955.856)|
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|
|=||(310.138 - -0.013||-||561.549)||/||2763.248|
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 -2.98 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