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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 Forestar Group Inc was 9.21. The lowest was -16.43. And the median was -2.30.
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 Forestar Group 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 * 1.4151||+||0.528 * -0.7748||+||0.404 * 0.9406||+||0.892 * 0.9501||+||0.115 * 0.3202|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0677||+||4.679 * -0.2986||-||0.327 * 1.0967|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $24.0 Mil.|
Revenue was 41.888 + 114.018 + 43.168 + 57.43 = $256.5 Mil.
Gross Profit was 17.885 + 8.341 + -69.572 + -35.009 = $-78.4 Mil.
Total Current Assets was $755.8 Mil.
Total Assets was $948.1 Mil.
Property, Plant and Equipment(Net PPE) was $52.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $38.5 Mil.
Selling, General & Admin. Expense(SGA) was $25.6 Mil.
Total Current Liabilities was $50.1 Mil.
Long-Term Debt was $372.8 Mil.
Net Income was -4.376 + -6.166 + -164.216 + -34.507 = $-209.3 Mil.
Non Operating Income was 0.121 + 6.328 + 1.222 + 7.205 = $14.9 Mil.
Cash Flow from Operations was 5.009 + 50.166 + 2.473 + 1.253 = $58.9 Mil.
|Accounts Receivable was $17.9 Mil.
Revenue was 47.805 + 80.316 + 58.84 + 83.013 = $270.0 Mil.
Gross Profit was 17.289 + -6.259 + 19.606 + 33.261 = $63.9 Mil.
Total Current Assets was $752.2 Mil.
Total Assets was $1,237.0 Mil.
Property, Plant and Equipment(Net PPE) was $291.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $45.6 Mil.
Selling, General & Admin. Expense(SGA) was $25.2 Mil.
Total Current Liabilities was $68.7 Mil.
Long-Term Debt was $434.4 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)|
|=||(24.036 / 256.504)||/||(17.877 / 269.974)|
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)|
|=||(63.897 / 269.974)||/||(-78.355 / 256.504)|
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 - (755.847 + 52.575) / 948.052)||/||(1 - (752.232 + 291.058) / 1236.971)|
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))|
|=||(45.601 / (45.601 + 291.058))||/||(38.545 / (38.545 + 52.575))|
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)|
|=||(25.59 / 256.504)||/||(25.227 / 269.974)|
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)|
|=||((372.759 + 50.077) / 948.052)||/||((434.413 + 68.65) / 1236.971)|
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|
|=||(-209.265 - 14.876||-||58.901)||/||948.052|
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.
Forestar Group Inc has a M-score of -4.62 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
Forestar Group Inc Annual Data
Forestar Group Inc Quarterly Data