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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.
TRW Automotive Holdings Corp has a M-score of -2.48 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of TRW Automotive Holdings Corp was -2.23. The lowest was -3.64. And the median was -2.48.
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 TRW Automotive Holdings Corp 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 * 1.0077||+||0.528 * 0.935||+||0.404 * 1.0088||+||0.892 * 1.0609||+||0.115 * 1.0559|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0096||+||4.679 * -0.0089||-||0.327 * 0.9828|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $3,078 Mil.|
Revenue was 4593 + 4442 + 4496 + 4212 = $17,743 Mil.
Gross Profit was 567 + 500 + 522 + 450 = $2,039 Mil.
Total Current Assets was $5,601 Mil.
Total Assets was $12,433 Mil.
Property, Plant and Equipment(Net PPE) was $2,734 Mil.
Depreciation, Depletion and Amortization(DDA) was $448 Mil.
Selling, General & Admin. Expense(SGA) was $678 Mil.
Total Current Liabilities was $4,757 Mil.
Long-Term Debt was $1,449 Mil.
Net Income was 265 + 199 + 363 + 197 = $1,024 Mil.
Non Operating Income was 10 + 10 + -4 + 12 = $28 Mil.
Cash Flow from Operations was 257 + -183 + 886 + 147 = $1,107 Mil.
|Accounts Receivable was $2,879 Mil.
Revenue was 4514 + 4213 + 4032 + 3965 = $16,724 Mil.
Gross Profit was 531 + 427 + 425 + 414 = $1,797 Mil.
Total Current Assets was $5,442 Mil.
Total Assets was $11,664 Mil.
Property, Plant and Equipment(Net PPE) was $2,411 Mil.
Depreciation, Depletion and Amortization(DDA) was $421 Mil.
Selling, General & Admin. Expense(SGA) was $633 Mil.
Total Current Liabilities was $4,612 Mil.
Long-Term Debt was $1,312 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)|
|=||(3078 / 17743)||/||(2879 / 16724)|
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)|
|=||(500 / 16724)||/||(567 / 17743)|
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 - (5601 + 2734) / 12433)||/||(1 - (5442 + 2411) / 11664)|
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))|
|=||(421 / (421 + 2411))||/||(448 / (448 + 2734))|
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)|
|=||(678 / 17743)||/||(633 / 16724)|
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)|
|=||((1449 + 4757) / 12433)||/||((1312 + 4612) / 11664)|
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|
|=||(1024 - 28||-||1107)||/||12433|
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.
TRW Automotive Holdings Corp has a M-score of -2.48 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
TRW Automotive Holdings Corp Annual Data
TRW Automotive Holdings Corp Quarterly Data