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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.
DR Horton Inc has a M-score of -1.44 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of DR Horton Inc was -1.01. The lowest was -8.86. And the median was -1.76.
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 DR Horton 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||+||0.528 * 1.0263||+||0.404 * 1.4932||+||0.892 * 1.2821||+||0.115 * 1.0603|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9825||+||4.679 * 0.1158||-||0.327 * 0.9202|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 2472.4 + 2147 + 1735 + 1670.6 = $8,025 Mil.
Gross Profit was 522.7 + 421.5 + 415.2 + 397 = $1,756 Mil.
Total Current Assets was $8,372 Mil.
Total Assets was $10,203 Mil.
Property, Plant and Equipment(Net PPE) was $194 Mil.
Depreciation, Depletion and Amortization(DDA) was $38 Mil.
Selling, General & Admin. Expense(SGA) was $966 Mil.
Total Current Liabilities was $1,400 Mil.
Long-Term Debt was $3,683 Mil.
Net Income was 166.2 + 113.1 + 131 + 123.2 = $534 Mil.
Non Operating Income was 3.9 + 3.1 + 2.8 + 3.3 = $13 Mil.
Cash Flow from Operations was -86.3 + -308.2 + -259.4 + -7.5 = $-661 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 1859.9 + 1692.8 + 1431.6 + 1275.1 = $6,259 Mil.
Gross Profit was 413.4 + 397.4 + 322.4 + 272.8 = $1,406 Mil.
Total Current Assets was $7,798 Mil.
Total Assets was $8,856 Mil.
Property, Plant and Equipment(Net PPE) was $107 Mil.
Depreciation, Depletion and Amortization(DDA) was $23 Mil.
Selling, General & Admin. Expense(SGA) was $767 Mil.
Total Current Liabilities was $1,286 Mil.
Long-Term Debt was $3,509 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)|
|=||(0 / 8025)||/||(0 / 6259.4)|
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)|
|=||(421.5 / 6259.4)||/||(522.7 / 8025)|
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 - (8372.3 + 193.7) / 10202.5)||/||(1 - (7798.3 + 106.7) / 8856.4)|
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))|
|=||(22.7 / (22.7 + 106.7))||/||(38.4 / (38.4 + 193.7))|
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)|
|=||(965.5 / 8025)||/||(766.5 / 6259.4)|
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)|
|=||((3682.8 + 1400) / 10202.5)||/||((3509 + 1286) / 8856.4)|
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|
|=||(533.5 - 13.1||-||-661.4)||/||10202.5|
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.
DR Horton Inc has a M-score of -1.44 signals that the company is likely to 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
DR Horton Inc Annual Data
DR Horton Inc Quarterly Data