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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 DR Horton Inc was -1.01. The lowest was -8.84. And the median was -1.84.
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 * 1.0353||+||0.404 * 1.0171||+||0.892 * 1.3488||+||0.115 * 0.6135|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9107||+||4.679 * 0.0033||-||0.327 * 0.9485|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 3172.5 + 2950.8 + 2398 + 2302.6 = $10,824 Mil.
Gross Profit was 663.7 + 630.4 + 506 + 488.2 = $2,288 Mil.
Total Current Assets was $9,201 Mil.
Total Assets was $11,151 Mil.
Property, Plant and Equipment(Net PPE) was $144 Mil.
Depreciation, Depletion and Amortization(DDA) was $54 Mil.
Selling, General & Admin. Expense(SGA) was $1,186 Mil.
Total Current Liabilities was $1,402 Mil.
Long-Term Debt was $3,812 Mil.
Net Income was 238.9 + 221.4 + 147.9 + 142.5 = $751 Mil.
Non Operating Income was 0 + 3.9 + 4.5 + 5.5 = $14 Mil.
Cash Flow from Operations was 511.8 + 357.4 + -39.8 + -129 = $700 Mil.
|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 $10,185 Mil.
Property, Plant and Equipment(Net PPE) was $191 Mil.
Depreciation, Depletion and Amortization(DDA) was $38 Mil.
Selling, General & Admin. Expense(SGA) was $966 Mil.
Total Current Liabilities was $1,355 Mil.
Long-Term Debt was $3,666 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 / 10823.9)||/||(0 / 8025)|
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)|
|=||(630.4 / 8025)||/||(663.7 / 10823.9)|
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 - (9200.5 + 144) / 11151)||/||(1 - (8372.3 + 190.8) / 10185.4)|
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))|
|=||(38.4 / (38.4 + 190.8))||/||(54.1 / (54.1 + 144))|
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)|
|=||(1185.9 / 10823.9)||/||(965.5 / 8025)|
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)|
|=||((3811.5 + 1402.2) / 11151)||/||((3665.7 + 1355.3) / 10185.4)|
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|
|=||(750.7 - 13.9||-||700.4)||/||11151|
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 -2.14 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