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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 2.51. The lowest was -3.55. And the median was -1.85.
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 * 0.8823||+||0.528 * 1.4775||+||0.404 * 1.0688||+||0.892 * 0.9267||+||0.115 * 0.8139|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8454||+||4.679 * -0.0857||-||0.327 * 1.1197|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $32.1 Mil.|
Revenue was 80.316 + 58.84 + 83.013 + 84.605 = $306.8 Mil.
Gross Profit was -6.259 + 19.606 + 33.261 + 35.025 = $81.6 Mil.
Total Current Assets was $216.5 Mil.
Total Assets was $1,258.2 Mil.
Property, Plant and Equipment(Net PPE) was $850.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $41.7 Mil.
Selling, General & Admin. Expense(SGA) was $22.2 Mil.
Total Current Liabilities was $73.9 Mil.
Long-Term Debt was $432.7 Mil.
Net Income was -11.8 + 5.227 + 14.822 + 8.334 = $16.6 Mil.
Non Operating Income was 6.849 + 3.912 + 3.227 + 3.285 = $17.3 Mil.
Cash Flow from Operations was 70.696 + 17.391 + 13.452 + 5.543 = $107.1 Mil.
|Accounts Receivable was $39.3 Mil.
Revenue was 98.388 + 75.107 + 60.079 + 97.471 = $331.0 Mil.
Gross Profit was 39.181 + 32.608 + 22.463 + 35.899 = $130.2 Mil.
Total Current Assets was $247.6 Mil.
Total Assets was $1,172.2 Mil.
Property, Plant and Equipment(Net PPE) was $758.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $30.0 Mil.
Selling, General & Admin. Expense(SGA) was $28.4 Mil.
Total Current Liabilities was $64.1 Mil.
Long-Term Debt was $357.4 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)|
|=||(32.092 / 306.774)||/||(39.252 / 331.045)|
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)|
|=||(19.606 / 331.045)||/||(-6.259 / 306.774)|
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 - (216.534 + 850.876) / 1258.199)||/||(1 - (247.642 + 758.217) / 1172.152)|
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))|
|=||(29.98 / (29.98 + 758.217))||/||(41.715 / (41.715 + 850.876))|
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)|
|=||(22.23 / 306.774)||/||(28.376 / 331.045)|
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)|
|=||((432.744 + 73.869) / 1258.199)||/||((357.407 + 64.115) / 1172.152)|
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|
|=||(16.583 - 17.273||-||107.082)||/||1258.199|
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 -2.81 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