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GuruFocus has detected 5 Warning Signs with Emerson Electric Co $EMR.
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Emerson Electric Co (NYSE:EMR)
Beneish M-Score
-3.00 (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.

Emerson Electric Co has a M-score of -3.00 suggests that the company is not a manipulator.

EMR' s Beneish M-Score Range Over the Past 10 Years
Min: -3.13   Max: -2.12
Current: -3

-3.13
-2.12

During the past 13 years, the highest Beneish M-Score of Emerson Electric Co was -2.12. The lowest was -3.13. And the median was -2.59.


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 Emerson Electric Co 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 * 0.6677+0.528 * 0.9976+0.404 * 0.7489+0.892 * 0.9584+0.115 * 0.6865
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0212+4.679 * -0.0227-0.327 * 0.7806
=-3.00

* 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 $2,479 Mil.
Revenue was 3574 + 3216 + -245 + 5126 = $11,671 Mil.
Gross Profit was 1557 + 1365 + 285 + 2094 = $5,301 Mil.
Total Current Assets was $9,446 Mil.
Total Assets was $17,277 Mil.
Property, Plant and Equipment(Net PPE) was $2,880 Mil.
Depreciation, Depletion and Amortization(DDA) was $565 Mil.
Selling, General & Admin. Expense(SGA) was $2,710 Mil.
Total Current Liabilities was $3,771 Mil.
Long-Term Debt was $3,816 Mil.
Net Income was 292 + 309 + 438 + 479 = $1,518 Mil.
Non Operating Income was -83 + -33 + 44 + -102 = $-174 Mil.
Cash Flow from Operations was 172 + 238 + 957 + 718 = $2,085 Mil.
Accounts Receivable was $3,874 Mil.
Revenue was 3579 + 3337 + -241 + 5503 = $12,178 Mil.
Gross Profit was 1542 + 1414 + 328 + 2234 = $5,518 Mil.
Total Current Assets was $9,913 Mil.
Total Assets was $21,764 Mil.
Property, Plant and Equipment(Net PPE) was $3,523 Mil.
Depreciation, Depletion and Amortization(DDA) was $447 Mil.
Selling, General & Admin. Expense(SGA) was $2,769 Mil.
Total Current Liabilities was $8,182 Mil.
Long-Term Debt was $4,062 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)
=(2479 / 11671) / (3874 / 12178)
=0.21240682 / 0.31811463
=0.6677

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)
=(5518 / 12178) / (5301 / 11671)
=0.45311217 / 0.45420272
=0.9976

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 - (9446 + 2880) / 17277) / (1 - (9913 + 3523) / 21764)
=0.28656595 / 0.38265025
=0.7489

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
=11671 / 12178
=0.9584

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))
=(447 / (447 + 3523)) / (565 / (565 + 2880))
=0.11259446 / 0.16400581
=0.6865

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)
=(2710 / 11671) / (2769 / 12178)
=0.23219947 / 0.22737724
=1.0212

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)
=((3816 + 3771) / 17277) / ((4062 + 8182) / 21764)
=0.43913874 / 0.56258041
=0.7806

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
=(1518 - -174 - 2085) / 17277
=-0.0227

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.

Emerson Electric Co has a M-score of -3.00 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.

Emerson Electric Co Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 1.02780.96190.96821.0520.98031.09820.95481.45220.62411.2963
GMI 0.98760.99290.97960.95031.0030.98610.99180.92171.01490.9537
AQI 0.9560.93741.11761.12470.94760.92080.9380.98061.04880.9871
SGI 1.11541.1270.81031.04661.15131.00781.01050.71880.91630.726
DEPI 0.98820.95670.97550.86480.98731.06031.07191.36150.79561.0079
SGAI 1.00361.00131.05841.04220.96071.01231.02821.02560.97891.0241
LVGI 0.99521.03520.96581.00830.98981.0141.03091.05121.10151.0143
TATA -0.0392-0.0411-0.0449-0.0361-0.0158-0.0039-0.0306-0.0519-0.0288-0.0491
M-score -2.56-2.64-2.85-2.56-2.45-2.44-2.69-2.59-3.06-2.72

Emerson Electric Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.38771.33811.33210.62411.10391.28031.31321.29630.75710.6677
GMI 0.91620.92950.94371.01491.00440.96650.95430.95370.96910.9976
AQI 0.93190.91830.93311.04880.95510.97070.96230.98710.84820.7489
SGI 0.71650.70410.6720.91630.79030.70380.71550.7260.83410.9584
DEPI 1.36431.34551.35540.79561.06731.2080.9941.00790.76510.6865
SGAI 1.01031.0151.01950.97890.98440.97160.96591.02411.01631.0212
LVGI 1.13061.0941.1151.10151.10791.0731.04451.01430.8020.7806
TATA -0.0448-0.0587-0.0371-0.0288-0.0317-0.0337-0.0479-0.0491-0.0504-0.0227
M-score -2.66-2.77-2.70-3.06-2.76-2.67-2.72-2.72-3.13-3.00
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