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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 -3.72. And the median was -2.57.
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 * 0.8406||+||0.528 * 1.0493||+||0.404 * 0.6317||+||0.892 * 1.0969||+||0.115 * 0.7011|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9843||+||4.679 * -0.0393||-||0.327 * 1.1426|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $45 Mil.|
Revenue was 172.238 + 654.27 + 662.176 + 640.782 = $2,129 Mil.
Gross Profit was -20.334 + 465.523 + 482.051 + 463.827 = $1,391 Mil.
Total Current Assets was $182 Mil.
Total Assets was $15,759 Mil.
Property, Plant and Equipment(Net PPE) was $11,326 Mil.
Depreciation, Depletion and Amortization(DDA) was $572 Mil.
Selling, General & Admin. Expense(SGA) was $104 Mil.
Total Current Liabilities was $567 Mil.
Long-Term Debt was $9,189 Mil.
Net Income was 58.661 + 151.25 + 301.717 + 116.119 = $628 Mil.
Non Operating Income was -19.911 + -19.037 + 89.107 + -16.807 = $33 Mil.
Cash Flow from Operations was 215.499 + 331.72 + 398.295 + 268.617 = $1,214 Mil.
|Accounts Receivable was $49 Mil.
Revenue was 65.585 + 657.499 + 607.532 + 610.791 = $1,941 Mil.
Gross Profit was -103.206 + 483.984 + 471.19 + 478.76 = $1,331 Mil.
Total Current Assets was $435 Mil.
Total Assets was $21,450 Mil.
Property, Plant and Equipment(Net PPE) was $11,854 Mil.
Depreciation, Depletion and Amortization(DDA) was $414 Mil.
Selling, General & Admin. Expense(SGA) was $96 Mil.
Total Current Liabilities was $553 Mil.
Long-Term Debt was $11,069 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)|
|=||(45.116 / 2129.466)||/||(48.929 / 1941.407)|
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)|
|=||(1330.728 / 1941.407)||/||(1391.067 / 2129.466)|
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 - (182.106 + 11325.83) / 15759.265)||/||(1 - (435.461 + 11854.242) / 21449.849)|
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))|
|=||(413.777 / (413.777 + 11854.242))||/||(572.4 / (572.4 + 11325.83))|
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)|
|=||(103.611 / 2129.466)||/||(95.965 / 1941.407)|
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)|
|=||((9189.495 + 566.541) / 15759.265)||/||((11069.003 + 553.116) / 21449.849)|
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|
|=||(627.747 - 33.352||-||1214.131)||/||15759.265|
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 -2.93 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