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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 -1.66 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of DR Horton Inc was 15.88. The lowest was -9.36. 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 * 0.9905||+||0.404 * 0.894||+||0.892 * 1.2923||+||0.115 * 1.1395|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9731||+||4.679 * 0.1202||-||0.327 * 0.9153|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 2147 + 1735 + 1670.6 + 1859.9 = $7,413 Mil.
Gross Profit was 421.5 + 415.2 + 397 + 413.4 = $1,647 Mil.
Total Current Assets was $8,553 Mil.
Total Assets was $9,717 Mil.
Property, Plant and Equipment(Net PPE) was $183 Mil.
Depreciation, Depletion and Amortization(DDA) was $33 Mil.
Selling, General & Admin. Expense(SGA) was $905 Mil.
Total Current Liabilities was $1,255 Mil.
Long-Term Debt was $3,445 Mil.
Net Income was 113.1 + 131 + 123.2 + 139.5 = $507 Mil.
Non Operating Income was 3.1 + 2.8 + 3.3 + 0 = $9 Mil.
Cash Flow from Operations was -308.2 + -259.4 + -7.5 + -94.8 = $-670 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 1692.8 + 1431.6 + 1275.1 + 1336.2 = $5,736 Mil.
Gross Profit was 397.4 + 322.4 + 272.8 + 269.8 = $1,262 Mil.
Total Current Assets was $7,256 Mil.
Total Assets was $8,287 Mil.
Property, Plant and Equipment(Net PPE) was $96 Mil.
Depreciation, Depletion and Amortization(DDA) was $20 Mil.
Selling, General & Admin. Expense(SGA) was $720 Mil.
Total Current Liabilities was $1,296 Mil.
Long-Term Debt was $3,084 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 / 7412.5)||/||(0 / 5735.7)|
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)|
|=||(415.2 / 5735.7)||/||(421.5 / 7412.5)|
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 - (8553.3 + 183.4) / 9716.6)||/||(1 - (7256.1 + 96.1) / 8287)|
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))|
|=||(20.4 / (20.4 + 96.1))||/||(33.3 / (33.3 + 183.4))|
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)|
|=||(905.1 / 7412.5)||/||(719.7 / 5735.7)|
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)|
|=||((3445.3 + 1255) / 9716.6)||/||((3083.6 + 1295.9) / 8287)|
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|
|=||(506.8 - 9.2||-||-669.9)||/||9716.6|
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 -1.66 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