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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 HCP Inc was -0.63. The lowest was -3.30. And the median was -2.43.
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 HCP 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 * 1.0269||+||0.528 * 1.0917||+||0.404 * 0.9076||+||0.892 * 1.0968||+||0.115 * 0.9688|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0251||+||4.679 * -0.0651||-||0.327 * 1.0977|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $45 Mil.|
Revenue was 640.782 + 668.036 + 657.953 + 607.532 = $2,574 Mil.
Gross Profit was 463.827 + 495.549 + 484.438 + 471.19 = $1,915 Mil.
Total Current Assets was $955 Mil.
Total Assets was $21,200 Mil.
Property, Plant and Equipment(Net PPE) was $12,065 Mil.
Depreciation, Depletion and Amortization(DDA) was $536 Mil.
Selling, General & Admin. Expense(SGA) was $97 Mil.
Total Current Liabilities was $563 Mil.
Long-Term Debt was $10,936 Mil.
Net Income was 116.119 + -598.868 + 115.362 + 164.885 = $-203 Mil.
Non Operating Income was -16.807 + -20.484 + -20.816 + -24.829 = $-83 Mil.
Cash Flow from Operations was 268.617 + 354.485 + 273.674 + 363.918 = $1,261 Mil.
|Accounts Receivable was $40 Mil.
Revenue was 610.791 + 603.528 + 596.638 + 536.121 = $2,347 Mil.
Gross Profit was 478.76 + 473.098 + 497.039 + 457.254 = $1,906 Mil.
Total Current Assets was $1,250 Mil.
Total Assets was $21,024 Mil.
Property, Plant and Equipment(Net PPE) was $10,837 Mil.
Depreciation, Depletion and Amortization(DDA) was $466 Mil.
Selling, General & Admin. Expense(SGA) was $86 Mil.
Total Current Liabilities was $402 Mil.
Long-Term Debt was $9,987 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)|
|=||(45.224 / 2574.303)||/||(40.153 / 2347.078)|
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)|
|=||(1906.151 / 2347.078)||/||(1915.004 / 2574.303)|
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 - (955.065 + 12065.135) / 21199.927)||/||(1 - (1249.88 + 10837.025) / 21024.442)|
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))|
|=||(465.97 / (465.97 + 10837.025))||/||(536.2 / (536.2 + 12065.135))|
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)|
|=||(96.748 / 2574.303)||/||(86.049 / 2347.078)|
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)|
|=||((10935.944 + 562.8) / 21199.927)||/||((9986.763 + 401.646) / 21024.442)|
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|
|=||(-202.502 - -82.936||-||1260.694)||/||21199.927|
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.
HCP Inc has a M-score of -2.70 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
HCP Inc Annual Data
HCP Inc Quarterly Data