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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 HollyFrontier Corp was 1.87. The lowest was -4.61. And the median was -2.30.
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 HollyFrontier Corp 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 * 0.9212||+||0.528 * 1.5762||+||0.404 * 1.0131||+||0.892 * 0.9915||+||0.115 * 0.916|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9049||+||4.679 * -0.0289||-||0.327 * 1.007|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $690 Mil.|
Revenue was 5317.555 + 5372.6 + 4791.053 + 4826.801 = $20,308 Mil.
Gross Profit was 410.705 + 426.1 + 378.467 + 202.016 = $1,417 Mil.
Total Current Assets was $3,894 Mil.
Total Assets was $10,182 Mil.
Property, Plant and Equipment(Net PPE) was $3,560 Mil.
Depreciation, Depletion and Amortization(DDA) was $342 Mil.
Selling, General & Admin. Expense(SGA) was $118 Mil.
Total Current Liabilities was $1,787 Mil.
Long-Term Debt was $1,039 Mil.
Net Income was 175.006 + 176.429 + 152.061 + 62.902 = $566 Mil.
Non Operating Income was -1.803 + -0.908 + -8.478 + -1.201 = $-12 Mil.
Cash Flow from Operations was 84.454 + 326.55 + 394.929 + 67.011 = $873 Mil.
|Accounts Receivable was $756 Mil.
Revenue was 5327.122 + 5298.848 + 4707.789 + 5147.507 = $20,481 Mil.
Gross Profit was 260.814 + 564.498 + 650.155 + 777.527 = $2,253 Mil.
Total Current Assets was $4,410 Mil.
Total Assets was $10,499 Mil.
Property, Plant and Equipment(Net PPE) was $3,312 Mil.
Depreciation, Depletion and Amortization(DDA) was $289 Mil.
Selling, General & Admin. Expense(SGA) was $132 Mil.
Total Current Liabilities was $1,894 Mil.
Long-Term Debt was $1,000 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)|
|=||(690.251 / 20308.009)||/||(755.672 / 20481.266)|
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)|
|=||(426.1 / 20481.266)||/||(410.705 / 20308.009)|
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 - (3893.733 + 3560.265) / 10181.77)||/||(1 - (4410.135 + 3312.255) / 10498.644)|
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))|
|=||(289.087 / (289.087 + 3312.255))||/||(341.948 / (341.948 + 3560.265))|
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)|
|=||(118.265 / 20308.009)||/||(131.815 / 20481.266)|
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)|
|=||((1039.396 + 1786.749) / 10181.77)||/||((999.884 + 1893.948) / 10498.644)|
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|
|=||(566.398 - -12.39||-||872.944)||/||10181.77|
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.
HollyFrontier Corp has a M-score of -2.38 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
HollyFrontier Corp Annual Data
HollyFrontier Corp Quarterly Data