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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 9.22. The lowest was -6.45. And the median was -2.38.
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 * 0.3373||+||0.528 * -0.811||+||0.404 * 0.9943||+||0.892 * 1.0715||+||0.115 * 0.2245|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0243||+||4.679 * -0.455||-||0.327 * 0.5293|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $6.7 Mil.|
Revenue was 47.992 + 41.888 + 114.018 + 43.168 = $247.1 Mil.
Gross Profit was -24.953 + 17.885 + 8.341 + -69.572 = $-68.3 Mil.
Total Current Assets was $544.3 Mil.
Total Assets was $681.8 Mil.
Property, Plant and Equipment(Net PPE) was $10.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $29.0 Mil.
Selling, General & Admin. Expense(SGA) was $25.5 Mil.
Total Current Liabilities was $35.4 Mil.
Long-Term Debt was $114.2 Mil.
Net Income was 9.614 + -4.376 + -6.166 + -164.216 = $-165.1 Mil.
Non Operating Income was 72.271 + 0.121 + 6.328 + 1.222 = $79.9 Mil.
Cash Flow from Operations was 7.53 + 5.009 + 50.166 + 2.473 = $65.2 Mil.
|Accounts Receivable was $18.5 Mil.
Revenue was 43.625 + 47.805 + 80.316 + 58.84 = $230.6 Mil.
Gross Profit was 21.06 + 17.289 + -6.259 + 19.606 = $51.7 Mil.
Total Current Assets was $732.7 Mil.
Total Assets was $1,192.3 Mil.
Property, Plant and Equipment(Net PPE) was $235.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $47.1 Mil.
Selling, General & Admin. Expense(SGA) was $23.3 Mil.
Total Current Liabilities was $59.2 Mil.
Long-Term Debt was $434.8 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)|
|=||(6.701 / 247.066)||/||(18.54 / 230.586)|
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)|
|=||(51.696 / 230.586)||/||(-68.299 / 247.066)|
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 - (544.28 + 10.003) / 681.833)||/||(1 - (732.688 + 235.315) / 1192.319)|
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))|
|=||(47.148 / (47.148 + 235.315))||/||(28.993 / (28.993 + 10.003))|
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)|
|=||(25.541 / 247.066)||/||(23.272 / 230.586)|
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)|
|=||((114.185 + 35.355) / 681.833)||/||((434.84 + 59.191) / 1192.319)|
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|
|=||(-165.144 - 79.942||-||65.178)||/||681.833|
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 -6.05 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