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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 -2.63.
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 * 1.1993||+||0.528 * 1.0946||+||0.404 * 0.8522||+||0.892 * 1.1227||+||0.115 * 1.0158|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0408||+||4.679 * -0.084||-||0.327 * 1.1282|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $49 Mil.|
Revenue was 668.036 + 657.953 + 607.532 + 610.791 = $2,544 Mil.
Gross Profit was 495.549 + 484.438 + 471.19 + 478.76 = $1,930 Mil.
Total Current Assets was $1,225 Mil.
Total Assets was $21,450 Mil.
Property, Plant and Equipment(Net PPE) was $12,283 Mil.
Depreciation, Depletion and Amortization(DDA) was $509 Mil.
Selling, General & Admin. Expense(SGA) was $96 Mil.
Total Current Liabilities was $559 Mil.
Long-Term Debt was $11,069 Mil.
Net Income was -598.868 + 115.362 + 164.885 + -240.614 = $-559 Mil.
Non Operating Income was 2.651 + -0.974 + 11.116 + 7.988 = $21 Mil.
Cash Flow from Operations was 354.485 + 273.674 + 363.918 + 230.068 = $1,222 Mil.
|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 $1,176 Mil.
Total Assets was $21,331 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 $9,721 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)|
|=||(48.929 / 2544.312)||/||(36.339 / 2266.279)|
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)|
|=||(484.438 / 2266.279)||/||(495.549 / 2544.312)|
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 - (1224.788 + 12282.716) / 21449.849)||/||(1 - (1176.086 + 10886.887) / 21331.436)|
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))|
|=||(459.046 / (459.046 + 10886.887))||/||(509.49 / (509.49 + 12282.716))|
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)|
|=||(96.022 / 2544.312)||/||(82.175 / 2266.279)|
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)|
|=||((11069.003 + 559.256) / 21449.849)||/||((9721.269 + 528.345) / 21331.436)|
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|
|=||(-559.235 - 20.781||-||1222.145)||/||21449.849|
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 -2.64 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