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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 12 years, the highest Beneish M-Score of Forestar Group Inc was 9.21. The lowest was -16.28. And the median was -2.15.
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 * 0.494||+||0.528 * -0.9564||+||0.404 * 1.1866||+||0.892 * 0.7041||+||0.115 * 0.4461|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.6844||+||4.679 * -0.2562||-||0.327 * 1.2171|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $17.1 Mil.|
Revenue was 43.168 + 57.43 + 47.805 + 80.316 = $228.7 Mil.
Gross Profit was -69.572 + -35.009 + 17.289 + -6.259 = $-93.6 Mil.
Total Current Assets was $741.6 Mil.
Total Assets was $1,041.2 Mil.
Property, Plant and Equipment(Net PPE) was $132.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $49.4 Mil.
Selling, General & Admin. Expense(SGA) was $27.6 Mil.
Total Current Liabilities was $69.7 Mil.
Long-Term Debt was $435.3 Mil.
Net Income was -164.216 + -34.507 + -8.158 + -11.8 = $-218.7 Mil.
Non Operating Income was 1.222 + 7.205 + 5.138 + -21.128 = $-7.6 Mil.
Cash Flow from Operations was 2.473 + 1.253 + -18.766 + 70.696 = $55.7 Mil.
|Accounts Receivable was $49.1 Mil.
Revenue was 58.84 + 83.013 + 84.605 + 98.388 = $324.8 Mil.
Gross Profit was 19.606 + 33.261 + 35.025 + 39.181 = $127.1 Mil.
Total Current Assets was $825.4 Mil.
Total Assets was $1,268.2 Mil.
Property, Plant and Equipment(Net PPE) was $271.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $37.4 Mil.
Selling, General & Admin. Expense(SGA) was $23.3 Mil.
Total Current Liabilities was $76.1 Mil.
Long-Term Debt was $429.3 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)|
|=||(17.09 / 228.719)||/||(49.138 / 324.846)|
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)|
|=||(-35.009 / 324.846)||/||(-69.572 / 228.719)|
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 - (741.577 + 132.502) / 1041.216)||/||(1 - (825.378 + 271.302) / 1268.239)|
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))|
|=||(37.391 / (37.391 + 271.302))||/||(49.386 / (49.386 + 132.502))|
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)|
|=||(27.599 / 228.719)||/||(23.272 / 324.846)|
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)|
|=||((435.295 + 69.699) / 1041.216)||/||((429.295 + 76.095) / 1268.239)|
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|
|=||(-218.681 - -7.563||-||55.656)||/||1041.216|
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 -5.62 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