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GuruFocus has detected 2 Warning Signs with Baker Hughes Inc $BHI.
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Baker Hughes Inc (NYSE:BHI)
Beneish M-Score
-3.01 (As of Today)

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.

Baker Hughes Inc has a M-score of -3.01 suggests that the company is not a manipulator.

BHI' s Beneish M-Score Range Over the Past 10 Years
Min: -982.85   Max: -1.27
Current: -3.01

-982.85
-1.27

During the past 13 years, the highest Beneish M-Score of Baker Hughes Inc was -1.27. The lowest was -982.85. And the median was -2.53.


Definition

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 Baker Hughes Inc 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 * 1.1311+0.528 * 3.2263+0.404 * 0.8745+0.892 * 0.6827+0.115 * 1.0294
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2862+4.679 * -0.3112-0.327 * 0.9702
=-3.01

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $2,162 Mil.
Revenue was 2262 + 2410 + 2353 + 2408 = $9,433 Mil.
Gross Profit was 374 + 266 + 294 + -704 = $230 Mil.
Total Current Assets was $8,964 Mil.
Total Assets was $18,676 Mil.
Property, Plant and Equipment(Net PPE) was $4,128 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,030 Mil.
Selling, General & Admin. Expense(SGA) was $792 Mil.
Total Current Liabilities was $2,130 Mil.
Long-Term Debt was $2,884 Mil.
Net Income was -129 + -417 + -429 + -911 = $-1,886 Mil.
Non Operating Income was 0 + -97 + 0 + -142 = $-239 Mil.
Cash Flow from Operations was -163 + 632 + 119 + 3577 = $4,165 Mil.
Accounts Receivable was $2,800 Mil.
Revenue was 2670 + 3394 + 3786 + 3968 = $13,818 Mil.
Gross Profit was 12 + 280 + 411 + 384 = $1,087 Mil.
Total Current Assets was $8,771 Mil.
Total Assets was $22,936 Mil.
Property, Plant and Equipment(Net PPE) was $6,323 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,636 Mil.
Selling, General & Admin. Expense(SGA) was $902 Mil.
Total Current Liabilities was $2,462 Mil.
Long-Term Debt was $3,885 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(2162 / 9433) / (2800 / 13818)
=0.22919538 / 0.20263425
=1.1311

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1087 / 13818) / (230 / 9433)
=0.07866551 / 0.02438249
=3.2263

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (8964 + 4128) / 18676) / (1 - (8771 + 6323) / 22936)
=0.29899336 / 0.34190792
=0.8745

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=9433 / 13818
=0.6827

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))
=(1636 / (1636 + 6323)) / (1030 / (1030 + 4128))
=0.20555346 / 0.1996898
=1.0294

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)
=(792 / 9433) / (902 / 13818)
=0.08396056 / 0.06527717
=1.2862

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)
=((2884 + 2130) / 18676) / ((3885 + 2462) / 22936)
=0.26847291 / 0.27672654
=0.9702

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-1886 - -239 - 4165) / 18676
=-0.3112

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.

Baker Hughes Inc has a M-score of -3.01 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Baker Hughes Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.00381.01771.03721.13380.89070.92531.01920.96060.9261.1193
GMI 1.1821.04251.40491.04680.97491.2261.10030.87072.3217-6.2846
AQI 0.93750.76091.13051.93170.88630.92240.95520.9891.25920.872
SGI 1.15521.13770.81451.49151.38931.06671.0471.09780.64120.6251
DEPI 1.06580.98280.99971.26750.95810.99090.96830.9450.80750.963
SGAI 0.61611.04451.24040.74830.69271.02550.94790.92981.14891.3276
LVGI 0.88051.32540.82210.98021.01551.00881.01530.97930.93320.9851
TATA 0.00390.0013-0.0719-0.00220.0109-0.0196-0.0739-0.0428-0.1563-0.3535
M-score -2.14-2.52-2.66-1.45-2.20-2.50-2.73-2.69-2.82-8.31

Baker Hughes Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.96060.8260.7470.79550.9261.0651.07431.10011.11931.1311
GMI 0.87070.99161.19591.37462.32172.1967-1851.817-12.1202-6.28463.2263
AQI 0.9891.04791.09691.13481.25921.20150.94470.93820.8720.8745
SGI 1.09781.0240.920.79840.64120.59020.57150.57020.62510.6827
DEPI 0.9450.90340.9050.89790.80750.85960.79760.84870.9631.0294
SGAI 0.92980.97961.02141.06651.14891.17211.22331.33641.32761.2862
LVGI 0.97930.94170.89790.86710.93320.97540.95330.97960.98510.9702
TATA -0.0428-0.0781-0.1089-0.1077-0.1563-0.1657-0.3631-0.3765-0.3535-0.3112
M-score -2.69-2.96-3.13-3.08-2.82-2.89-982.85-11.55-8.31-3.01
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