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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 -3.15. And the median was -2.58.
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 * 1.2024||+||0.528 * 1.0116||+||0.404 * 1.0295||+||0.892 * 1.0551||+||0.115 * 0.937|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7787||+||4.679 * -0.0085||-||0.327 * 1.0322|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $35 Mil.|
Revenue was 596.638 + 536.121 + 529.992 + 530.297 = $2,193 Mil.
Gross Profit was 497.039 + 457.254 + 454.285 + 454.005 = $1,863 Mil.
Total Current Assets was $591 Mil.
Total Assets was $20,745 Mil.
Property, Plant and Equipment(Net PPE) was $10,840 Mil.
Depreciation, Depletion and Amortization(DDA) was $450 Mil.
Selling, General & Admin. Expense(SGA) was $95 Mil.
Total Current Liabilities was $406 Mil.
Long-Term Debt was $9,215 Mil.
Net Income was 247.654 + 218.885 + 259.111 + 293.095 = $1,019 Mil.
Non Operating Income was 3.111 + 0.709 + 1.93 + 1.184 = $7 Mil.
Cash Flow from Operations was 275.317 + 360.524 + 247.181 + 305.307 = $1,188 Mil.
|Accounts Receivable was $27 Mil.
Revenue was 546.157 + 512.239 + 511.186 + 508.971 = $2,079 Mil.
Gross Profit was 470.74 + 438.352 + 438.5 + 438.289 = $1,786 Mil.
Total Current Assets was $516 Mil.
Total Assets was $19,890 Mil.
Property, Plant and Equipment(Net PPE) was $10,700 Mil.
Depreciation, Depletion and Amortization(DDA) was $415 Mil.
Selling, General & Admin. Expense(SGA) was $115 Mil.
Total Current Liabilities was $376 Mil.
Long-Term Debt was $8,561 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)|
|=||(34.687 / 2193.048)||/||(27.343 / 2078.553)|
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)|
|=||(457.254 / 2078.553)||/||(497.039 / 2193.048)|
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 - (591.467 + 10840.024) / 20744.89)||/||(1 - (515.784 + 10699.853) / 19889.509)|
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))|
|=||(415.158 / (415.158 + 10699.853))||/||(450.043 / (450.043 + 10840.024))|
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)|
|=||(94.6 / 2193.048)||/||(115.14 / 2078.553)|
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)|
|=||((9214.637 + 405.589) / 20744.89)||/||((8560.592 + 375.621) / 19889.509)|
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|
|=||(1018.745 - 6.934||-||1188.329)||/||20744.89|
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 -2.25 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