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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 5 years, the highest Beneish M-Score of Sunoco LP was -0.98. The lowest was -2.04. And the median was -1.55.
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 Sunoco LP 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 * 1.2192||+||0.528 * 0.2535||+||0.404 * 4.6969||+||0.892 * 0.6195||+||0.115 * 1.1863|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 3.6138||+||4.679 * -0.0381||-||0.327 * 0.5639|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Mar15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $56 Mil.|
Revenue was 1129.728 + 1889.827 + 0 + 0 = $3,020 Mil.
Gross Profit was 87.049 + 115.245 + 0 + 0 = $202 Mil.
Total Current Assets was $212 Mil.
Total Assets was $2,210 Mil.
Property, Plant and Equipment(Net PPE) was $928 Mil.
Depreciation, Depletion and Amortization(DDA) was $38 Mil.
Selling, General & Admin. Expense(SGA) was $46 Mil.
Total Current Liabilities was $169 Mil.
Long-Term Debt was $856 Mil.
Net Income was 17.072 + 34.233 + 0 + 0 = $51 Mil.
Non Operating Income was -0.381 + -1.987 + 0 + 0 = $-2 Mil.
Cash Flow from Operations was 43.68 + 72.613 + 0 + 21.543 = $138 Mil.
|Accounts Receivable was $74 Mil.
Revenue was 1376.025 + 1216.587 + 1114.468 + 1166.797 = $4,874 Mil.
Gross Profit was 22.203 + 22.12 + 20.049 + 18.403 = $83 Mil.
Total Current Assets was $172 Mil.
Total Assets was $459 Mil.
Property, Plant and Equipment(Net PPE) was $240 Mil.
Depreciation, Depletion and Amortization(DDA) was $12 Mil.
Selling, General & Admin. Expense(SGA) was $21 Mil.
Total Current Liabilities was $142 Mil.
Long-Term Debt was $236 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)|
|=||(55.586 / 3019.555)||/||(73.593 / 4873.877)|
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)|
|=||(115.245 / 4873.877)||/||(87.049 / 3019.555)|
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 - (211.92 + 927.76) / 2210.405)||/||(1 - (172.389 + 239.59) / 459.353)|
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))|
|=||(11.688 / (11.688 + 239.59))||/||(37.862 / (37.862 + 927.76))|
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)|
|=||(46.012 / 3019.555)||/||(20.551 / 4873.877)|
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)|
|=||((856.187 + 168.801) / 2210.405)||/||((235.776 + 141.949) / 459.353)|
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|
|=||(51.305 - -2.368||-||137.836)||/||2210.405|
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.
Sunoco LP has a M-score of -1.98 signals that the company is likely to 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
Sunoco LP Annual Data
Sunoco LP Quarterly Data