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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 -0.71. The lowest was -3.00. And the median was -2.62.
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 * 1.2247||+||0.528 * 1.0333||+||0.404 * 1.0564||+||0.892 * 1.0792||+||0.115 * 0.9451|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7389||+||4.679 * -0.0158||-||0.327 * 1.0684|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $36 Mil.|
Revenue was 603.528 + 596.638 + 536.121 + 529.992 = $2,266 Mil.
Gross Profit was 473.098 + 497.039 + 457.254 + 454.285 = $1,882 Mil.
Total Current Assets was $269 Mil.
Total Assets was $21,370 Mil.
Property, Plant and Equipment(Net PPE) was $10,887 Mil.
Depreciation, Depletion and Amortization(DDA) was $459 Mil.
Selling, General & Admin. Expense(SGA) was $82 Mil.
Total Current Liabilities was $528 Mil.
Long-Term Debt was $9,760 Mil.
Net Income was 196.583 + 247.654 + 218.885 + 259.111 = $922 Mil.
Non Operating Income was 5.066 + 3.111 + 0.709 + 1.93 = $11 Mil.
Cash Flow from Operations was 365.599 + 275.317 + 360.524 + 247.181 = $1,249 Mil.
|Accounts Receivable was $27 Mil.
Revenue was 530.297 + 546.157 + 512.239 + 511.186 = $2,100 Mil.
Gross Profit was 454.005 + 470.74 + 438.352 + 438.5 = $1,802 Mil.
Total Current Assets was $365 Mil.
Total Assets was $20,076 Mil.
Property, Plant and Equipment(Net PPE) was $10,627 Mil.
Depreciation, Depletion and Amortization(DDA) was $423 Mil.
Selling, General & Admin. Expense(SGA) was $103 Mil.
Total Current Liabilities was $384 Mil.
Long-Term Debt was $8,662 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)|
|=||(36.339 / 2266.279)||/||(27.494 / 2099.879)|
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)|
|=||(497.039 / 2099.879)||/||(473.098 / 2266.279)|
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 - (269.125 + 10886.887) / 21369.94)||/||(1 - (365.279 + 10627.249) / 20075.87)|
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))|
|=||(422.528 / (422.528 + 10627.249))||/||(459.046 / (459.046 + 10886.887))|
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)|
|=||(82.175 / 2266.279)||/||(103.043 / 2099.879)|
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)|
|=||((9759.773 + 528.345) / 21369.94)||/||((8661.627 + 384.299) / 20075.87)|
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|
|=||(922.233 - 10.816||-||1248.621)||/||21369.94|
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 -2.22 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