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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 13 years, the highest Beneish M-Score of Westinghouse Air Brake Technologies Corp was -1.43. The lowest was -3.42. And the median was -2.47.
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 Westinghouse Air Brake Technologies 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 * 1.5221||+||0.528 * 1.0046||+||0.404 * 1.1733||+||0.892 * 0.8861||+||0.115 * 1.3053|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2079||+||4.679 * -0.0215||-||0.327 * 1.161|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $668 Mil.|
Revenue was 759.982 + 675.574 + 723.601 + 772.031 = $2,931 Mil.
Gross Profit was 219.189 + 212.481 + 237.389 + 255.18 = $924 Mil.
Total Current Assets was $2,868 Mil.
Total Assets was $6,581 Mil.
Property, Plant and Equipment(Net PPE) was $518 Mil.
Depreciation, Depletion and Amortization(DDA) was $70 Mil.
Selling, General & Admin. Expense(SGA) was $372 Mil.
Total Current Liabilities was $1,447 Mil.
Long-Term Debt was $1,763 Mil.
Net Income was 37.811 + 82.428 + 90.485 + 94.163 = $305 Mil.
Non Operating Income was -3.076 + 1.188 + -1.229 + 0.154 = $-3 Mil.
Cash Flow from Operations was 202.414 + 32.917 + 138.41 + 75.566 = $449 Mil.
|Accounts Receivable was $495 Mil.
Revenue was 832.849 + 809.527 + 847.028 + 818.594 = $3,308 Mil.
Gross Profit was 267.628 + 257.069 + 267.764 + 255.355 = $1,048 Mil.
Total Current Assets was $1,540 Mil.
Total Assets was $3,230 Mil.
Property, Plant and Equipment(Net PPE) was $353 Mil.
Depreciation, Depletion and Amortization(DDA) was $65 Mil.
Selling, General & Admin. Expense(SGA) was $347 Mil.
Total Current Liabilities was $665 Mil.
Long-Term Debt was $692 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)|
|=||(667.596 / 2931.188)||/||(494.975 / 3307.998)|
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)|
|=||(1047.816 / 3307.998)||/||(924.239 / 2931.188)|
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 - (2867.631 + 518.376) / 6581.018)||/||(1 - (1540.02 + 353.193) / 3229.513)|
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))|
|=||(64.734 / (64.734 + 353.193))||/||(69.795 / (69.795 + 518.376))|
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)|
|=||(371.805 / 2931.188)||/||(347.373 / 3307.998)|
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)|
|=||((1762.967 + 1446.639) / 6581.018)||/||((691.805 + 664.776) / 3229.513)|
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|
|=||(304.887 - -2.963||-||449.307)||/||6581.018|
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.
Westinghouse Air Brake Technologies Corp has a M-score of -2.18 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
Westinghouse Air Brake Technologies Corp Annual Data
Westinghouse Air Brake Technologies Corp Quarterly Data