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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 -0.96. The lowest was -3.13. And the median was -2.41.
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 * 0.8801||+||0.528 * 0.9671||+||0.404 * 0.9509||+||0.892 * 1.1346||+||0.115 * 0.9486|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0169||+||4.679 * -0.0296||-||0.327 * 0.8971|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $474 Mil.|
Revenue was 809.527 + 847.028 + 818.594 + 820.866 = $3,296 Mil.
Gross Profit was 257.069 + 267.764 + 255.355 + 254.297 = $1,034 Mil.
Total Current Assets was $1,650 Mil.
Total Assets was $3,326 Mil.
Property, Plant and Equipment(Net PPE) was $351 Mil.
Depreciation, Depletion and Amortization(DDA) was $64 Mil.
Selling, General & Admin. Expense(SGA) was $349 Mil.
Total Current Liabilities was $655 Mil.
Long-Term Debt was $451 Mil.
Net Income was 99.181 + 101.504 + 96.164 + 92.686 = $390 Mil.
Non Operating Income was -2.937 + -1.887 + -2.866 + -1.752 = $-9 Mil.
Cash Flow from Operations was 144.38 + 67.265 + 43.661 + 242.221 = $498 Mil.
|Accounts Receivable was $475 Mil.
Revenue was 797.271 + 731.068 + 695.249 + 681.482 = $2,905 Mil.
Gross Profit was 247.458 + 224.658 + 209.569 + 200.125 = $882 Mil.
Total Current Assets was $1,534 Mil.
Total Assets was $3,228 Mil.
Property, Plant and Equipment(Net PPE) was $342 Mil.
Depreciation, Depletion and Amortization(DDA) was $59 Mil.
Selling, General & Admin. Expense(SGA) was $303 Mil.
Total Current Liabilities was $675 Mil.
Long-Term Debt was $521 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)|
|=||(474.213 / 3296.015)||/||(474.93 / 2905.07)|
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)|
|=||(267.764 / 2905.07)||/||(257.069 / 3296.015)|
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 - (1650.091 + 351.234) / 3326.082)||/||(1 - (1533.808 + 342.365) / 3228.387)|
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))|
|=||(59.035 / (59.035 + 342.365))||/||(64.451 / (64.451 + 351.234))|
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)|
|=||(349.086 / 3296.015)||/||(302.564 / 2905.07)|
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)|
|=||((450.589 + 654.649) / 3326.082)||/||((521.087 + 674.748) / 3228.387)|
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|
|=||(389.535 - -9.442||-||497.527)||/||3326.082|
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 -2.62 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
Westinghouse Air Brake Technologies Corp Annual Data
Westinghouse Air Brake Technologies Corp Quarterly Data