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GuruFocus has detected 4 Warning Signs with General Dynamics Corp $GD.
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General Dynamics Corp (NYSE:GD)
Beneish M-Score
-2.49 (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.

General Dynamics Corp has a M-score of -2.49 suggests that the company is not a manipulator.

GD' s Beneish M-Score Range Over the Past 10 Years
Min: -6.5   Max: -0.08
Current: -2.49

-6.5
-0.08

During the past 13 years, the highest Beneish M-Score of General Dynamics Corp was -0.08. The lowest was -6.50. And the median was -2.45.


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 General Dynamics 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 * 0.956+0.528 * 0.9545+0.404 * 0.8966+0.892 * 0.9971+0.115 * 1.0316
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0297+4.679 * 0.0225-0.327 * 1.0063
=-2.49

* 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 $3,483 Mil.
Revenue was 7441 + 8233 + 7731 + 7665 = $31,070 Mil.
Gross Profit was 1516 + 1640 + 1540 + 1556 = $6,252 Mil.
Total Current Assets was $16,614 Mil.
Total Assets was $33,211 Mil.
Property, Plant and Equipment(Net PPE) was $3,412 Mil.
Depreciation, Depletion and Amortization(DDA) was $449 Mil.
Selling, General & Admin. Expense(SGA) was $1,961 Mil.
Total Current Liabilities was $13,165 Mil.
Long-Term Debt was $2,988 Mil.
Net Income was 763 + 797 + 683 + 758 = $3,001 Mil.
Non Operating Income was 0 + 0 + 2 + 1 = $3 Mil.
Cash Flow from Operations was 533 + 826 + 499 + 393 = $2,251 Mil.
Accounts Receivable was $3,654 Mil.
Revenue was 7476 + 7809 + 7994 + 7882 = $31,161 Mil.
Gross Profit was 1385 + 1542 + 1510 + 1548 = $5,985 Mil.
Total Current Assets was $14,188 Mil.
Total Assets was $31,702 Mil.
Property, Plant and Equipment(Net PPE) was $3,477 Mil.
Depreciation, Depletion and Amortization(DDA) was $474 Mil.
Selling, General & Admin. Expense(SGA) was $1,910 Mil.
Total Current Liabilities was $12,423 Mil.
Long-Term Debt was $2,899 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)
=(3483 / 31070) / (3654 / 31161)
=0.11210171 / 0.11726196
=0.956

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)
=(5985 / 31161) / (6252 / 31070)
=0.19206701 / 0.20122304
=0.9545

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 - (16614 + 3412) / 33211) / (1 - (14188 + 3477) / 31702)
=0.39700702 / 0.44277964
=0.8966

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
=31070 / 31161
=0.9971

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))
=(474 / (474 + 3477)) / (449 / (449 + 3412))
=0.11996963 / 0.11629112
=1.0316

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)
=(1961 / 31070) / (1910 / 31161)
=0.06311555 / 0.06129457
=1.0297

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)
=((2988 + 13165) / 33211) / ((2899 + 12423) / 31702)
=0.486375 / 0.48331336
=1.0063

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
=(3001 - 3 - 2251) / 33211
=0.0225

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.

General Dynamics Corp has a M-score of -2.49 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.

General Dynamics Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.08450.97141.03061.14361.00081.03850.93180.83421.0601
GMI 1.09461.12190.96711.01561.11530.86780.97270.97720.9899
AQI 0.9231.0050.98510.98410.94980.89081.04961.05590.9732
SGI 1.1321.09151.01521.00650.94841.00090.99461.020.9884
DEPI 1.02980.83251.00651.05241.03371.09311.04241.06211.0544
SGAI 02.13630.99011.02691.15360.92260.97260.96461.006
LVGI 0.92570.91690.96031.03211.04891.00641.06510.98841.0045
TATA -0.0333-0.0143-0.0112-0.0214-0.0817-0.0215-0.03660.0110.0203
M-score -2.22-2.61-2.50-2.45-2.91-2.64-2.72-2.54-2.35

General Dynamics Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.93180.84080.77170.86580.83421.00481.0110.96291.06010.956
GMI 0.97270.96830.96740.97230.97721.00210.99940.98370.98990.9545
AQI 1.04961.04991.0741.10961.05591.0351.0150.98160.97320.8966
SGI 0.99461.01591.04121.04861.020.99330.97370.95810.98840.9971
DEPI 1.04241.00061.0451.06571.06211.08071.05971.05031.05441.0316
SGAI 0.97260.96550.94610.94740.96460.96341.0021.01681.0061.0297
LVGI 1.06511.03050.98870.95280.98841.00590.9880.991.00451.0063
TATA -0.0366-0.0436-0.03280.01820.0110.01680.02630.03430.02030.0225
M-score -2.72-2.82-2.78-2.41-2.54-2.37-2.35-2.40-2.35-2.49
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