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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 -1.83.
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 * 0.9731||+||0.404 * 0.9906||+||0.892 * 1.2133||+||0.115 * 0.5947|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9241||+||4.679 * -0.0092||-||0.327 * 0.8974|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $0 Mil.|
Revenue was 2767.9 + 2416.4 + 3172.4 + 2950.8 = $11,308 Mil.
Gross Profit was 598.6 + 524.2 + 663.6 + 630.4 = $2,417 Mil.
Total Current Assets was $9,452 Mil.
Total Assets was $11,300 Mil.
Property, Plant and Equipment(Net PPE) was $150 Mil.
Depreciation, Depletion and Amortization(DDA) was $56 Mil.
Selling, General & Admin. Expense(SGA) was $1,226 Mil.
Total Current Liabilities was $1,347 Mil.
Long-Term Debt was $3,663 Mil.
Net Income was 195.1 + 157.7 + 238.9 + 221.4 = $813 Mil.
Non Operating Income was 9.6 + 3.4 + 4.5 + 3.9 = $21 Mil.
Cash Flow from Operations was 28.4 + -1.5 + 511.8 + 357.4 = $896 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 2398 + 2302.6 + 2472.4 + 2147 = $9,320 Mil.
Gross Profit was 506 + 488.2 + 522.7 + 421.5 = $1,938 Mil.
Total Current Assets was $8,845 Mil.
Total Assets was $10,713 Mil.
Property, Plant and Equipment(Net PPE) was $242 Mil.
Depreciation, Depletion and Amortization(DDA) was $47 Mil.
Selling, General & Admin. Expense(SGA) was $1,093 Mil.
Total Current Liabilities was $1,347 Mil.
Long-Term Debt was $3,946 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 / 11307.5)||/||(0 / 9320)|
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)|
|=||(524.2 / 9320)||/||(598.6 / 11307.5)|
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 - (9452.1 + 149.5) / 11300.2)||/||(1 - (8845 + 242.4) / 10713.1)|
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))|
|=||(47.1 / (47.1 + 242.4))||/||(56.3 / (56.3 + 149.5))|
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)|
|=||(1225.6 / 11307.5)||/||(1093.1 / 9320)|
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)|
|=||((3662.7 + 1346.8) / 11300.2)||/||((3945.5 + 1346.6) / 10713.1)|
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|
|=||(813.1 - 21.4||-||896.1)||/||11300.2|
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 -2.35 suggests that the company will not 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