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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 -1.02. The lowest was -3.42. And the median was -2.42.
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 * 0.9126||+||0.528 * 0.9628||+||0.404 * 0.9538||+||0.892 * 0.9556||+||0.115 * 0.9653|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0133||+||4.679 * -0.0486||-||0.327 * 1.25|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $441 Mil.|
Revenue was 723.601 + 772.031 + 832.849 + 809.527 = $3,138 Mil.
Gross Profit was 237.389 + 255.18 + 267.628 + 257.069 = $1,017 Mil.
Total Current Assets was $1,700 Mil.
Total Assets was $3,379 Mil.
Property, Plant and Equipment(Net PPE) was $349 Mil.
Depreciation, Depletion and Amortization(DDA) was $66 Mil.
Selling, General & Admin. Expense(SGA) was $344 Mil.
Total Current Liabilities was $665 Mil.
Long-Term Debt was $744 Mil.
Net Income was 90.485 + 94.163 + 101.779 + 99.181 = $386 Mil.
Non Operating Income was -1.229 + 0.154 + 2.379 + -2.937 = $-2 Mil.
Cash Flow from Operations was 138.41 + 75.566 + 192.954 + 144.38 = $551 Mil.
|Accounts Receivable was $506 Mil.
Revenue was 847.028 + 818.594 + 820.866 + 797.271 = $3,284 Mil.
Gross Profit was 267.764 + 255.355 + 254.297 + 247.458 = $1,025 Mil.
Total Current Assets was $1,580 Mil.
Total Assets was $3,298 Mil.
Property, Plant and Equipment(Net PPE) was $357 Mil.
Depreciation, Depletion and Amortization(DDA) was $65 Mil.
Selling, General & Admin. Expense(SGA) was $355 Mil.
Total Current Liabilities was $700 Mil.
Long-Term Debt was $400 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)|
|=||(440.9 / 3138.008)||/||(505.539 / 3283.759)|
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)|
|=||(1024.874 / 3283.759)||/||(1017.266 / 3138.008)|
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 - (1700.358 + 348.65) / 3379.196)||/||(1 - (1579.966 + 356.97) / 3298.123)|
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))|
|=||(65.011 / (65.011 + 356.97))||/||(66.215 / (66.215 + 348.65))|
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)|
|=||(343.971 / 3138.008)||/||(355.239 / 3283.759)|
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)|
|=||((744.139 + 664.552) / 3379.196)||/||((400.348 + 699.527) / 3298.123)|
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|
|=||(385.608 - -1.633||-||551.31)||/||3379.196|
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 -2.95 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