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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 D.R. Horton Inc was 0.04. The lowest was -8.92. And the median was -1.86.
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 D.R. 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 * 0.9712||+||0.404 * 0.9126||+||0.892 * 1.1561||+||0.115 * 1.2374|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9783||+||4.679 * 0.0293||-||0.327 * 0.7433|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 2904.2 + 3741.2 + 3231.9 + 2767.9 = $12,645 Mil.
Gross Profit was 636.3 + 822.9 + 708.9 + 598.6 = $2,767 Mil.
Total Current Assets was $9,902 Mil.
Total Assets was $11,712 Mil.
Property, Plant and Equipment(Net PPE) was $218 Mil.
Depreciation, Depletion and Amortization(DDA) was $62 Mil.
Selling, General & Admin. Expense(SGA) was $1,357 Mil.
Total Current Liabilities was $742 Mil.
Long-Term Debt was $3,218 Mil.
Net Income was 206.9 + 283.7 + 249.8 + 195.1 = $936 Mil.
Non Operating Income was 4.1 + -11.3 + 3.8 + 9.6 = $6 Mil.
Cash Flow from Operations was -33.3 + 529.4 + 61.7 + 28.4 = $586 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 2416.4 + 3172.4 + 2950.8 + 2398 = $10,938 Mil.
Gross Profit was 524.2 + 663.6 + 630.4 + 506 = $2,324 Mil.
Total Current Assets was $9,367 Mil.
Total Assets was $11,180 Mil.
Property, Plant and Equipment(Net PPE) was $148 Mil.
Depreciation, Depletion and Amortization(DDA) was $55 Mil.
Selling, General & Admin. Expense(SGA) was $1,200 Mil.
Total Current Liabilities was $1,351 Mil.
Long-Term Debt was $3,734 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 / 12645.2)||/||(0 / 10937.6)|
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)|
|=||(2324.2 / 10937.6)||/||(2766.7 / 12645.2)|
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 - (9901.5 + 218.4) / 11712.1)||/||(1 - (9366.6 + 147.6) / 11179.5)|
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))|
|=||(55.4 / (55.4 + 147.6))||/||(61.8 / (61.8 + 218.4))|
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)|
|=||(1356.7 / 12645.2)||/||(1199.5 / 10937.6)|
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)|
|=||((3217.6 + 742.3) / 11712.1)||/||((3734.3 + 1350.9) / 11179.5)|
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|
|=||(935.5 - 6.2||-||586.2)||/||11712.1|
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.
D.R. 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
D.R. Horton Inc Annual Data
D.R. Horton Inc Quarterly Data