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Honda Motor Co Ltd (NYSE:HMC)
Beneish M-Score
-1.18 (As of Today)

Warning Sign:

Beneish M-Score -1.18 higher than -2.22, which implies that it might have manipulated its financial results.

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.

Honda Motor Co Ltd has a M-score of -1.31 signals that the company is a manipulator.

HMC' s 10-Year Beneish M-Score Range
Min: -3.42   Max: -1.18
Current: -1.18

-3.42
-1.18

During the past 13 years, the highest Beneish M-Score of Honda Motor Co Ltd was -1.18. The lowest was -3.42. And the median was -2.60.


Definition

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 Honda Motor Co Ltd 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 * 2.4641+0.528 * 0.9853+0.404 * 0.9693+0.892 * 1.0292+0.115 * 0.9942
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9939+4.679 * -0.038-0.327 * 1.0178
=-1.31

* 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 $24,415 Mil.
Revenue was 27907.7706931 + 29371.7220366 + 30229.4208359 + 29113.915633 = $116,623 Mil.
Gross Profit was 6886.08525323 + 7371.89895813 + 8005.5242148 + 7826.09072773 = $30,090 Mil.
Total Current Assets was $54,338 Mil.
Total Assets was $152,486 Mil.
Property, Plant and Equipment(Net PPE) was $51,410 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,124 Mil.
Selling, General & Admin. Expense(SGA) was $16,583 Mil.
Total Current Liabilities was $45,952 Mil.
Long-Term Debt was $31,456 Mil.
Net Income was 1313.54928055 + 1440.06290545 + 1664.17458861 + 1549.05985871 = $5,967 Mil.
Non Operating Income was 123.599416439 + 0.304698250442 + 58.2580179195 + -132.352232534 = $50 Mil.
Cash Flow from Operations was 2802.02802278 + 3486.05268331 + 3500.88816881 + 1917.82076117 = $11,707 Mil.
Accounts Receivable was $9,627 Mil.
Revenue was 29561.4298865 + 28433.9289477 + 28079.1341885 + 27238.3390599 = $113,313 Mil.
Gross Profit was 7562.73908152 + 7120.14286718 + 7103.29589394 + 7020.53717802 = $28,807 Mil.
Total Current Assets was $54,456 Mil.
Total Assets was $148,391 Mil.
Property, Plant and Equipment(Net PPE) was $47,014 Mil.
Depreciation, Depletion and Amortization(DDA) was $7,379 Mil.
Selling, General & Admin. Expense(SGA) was $16,211 Mil.
Total Current Liabilities was $43,121 Mil.
Long-Term Debt was $30,893 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(24415.0226241 / 116622.829199) / (9626.97146364 / 113312.832083)
=0.20935029 / 0.08495923
=2.4641

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(7371.89895813 / 113312.832083) / (6886.08525323 / 116622.829199)
=0.25422288 / 0.2580078
=0.9853

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (54338.1617827 + 51409.9701554) / 152486.410729) / (1 - (54456.2033344 + 47013.5931267) / 148391.060653)
=0.30650783 / 0.31620007
=0.9693

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=116622.829199 / 113312.832083
=1.0292

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))
=(7378.87024816 / (7378.87024816 + 47013.5931267)) / (8123.54159116 / (8123.54159116 + 51409.9701554))
=0.13565979 / 0.13645326
=0.9942

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)
=(16582.9202519 / 116622.829199) / (16210.6429812 / 113312.832083)
=0.14219275 / 0.14306096
=0.9939

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)
=((31455.6812039 + 45952.0357987) / 152486.410729) / ((30893.4540248 + 43120.5277693) / 148391.060653)
=0.50763682 / 0.49877655
=1.0178

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(5966.84663332 - 49.8099000745 - 11706.7896361) / 152486.410729
=-0.038

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.

Honda Motor Co Ltd has a M-score of -1.31 signals that the company is likely to be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Honda Motor Co Ltd Annual Data

Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14
DSRI 1.99971.06290.97920.89411.00241.20690.85591.15930.99670.9607
GMI 1.03571.03251.00631.00831.11341.02610.9241.06980.99530.9854
AQI 1.02750.97751.00060.86450.94190.97810.99480.98540.97791.0285
SGI 1.06581.04821.10171.25030.86830.90711.17040.91041.0331.1439
DEPI 1.03770.98790.83271.06420.91011.00061.07171.0941.09240.8993
SGAI 0.94970.95560.98090.97471.14910.84870.99251.03870.89940.9914
LVGI 1.00330.97440.92691.00371.01080.94420.98391.01781.01151.0187
TATA -0.0411-0.0139-0.0272-0.044-0.0169-0.1068-0.0503-0.0449-0.0267-0.0398
M-score -1.65-2.42-2.52-2.60-2.68-2.82-2.72-2.59-2.57-2.59

Honda Motor Co Ltd Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.98690.93210.95710.90550.3940.42131.12821.07631.02932.4641
GMI 1.01741.00850.98080.99451.02561.01491.00560.98660.97180.9853
AQI 0.94940.97370.94930.97791.01351.02961.04291.02851.00190.9693
SGI 1.08851.16321.18711.13691.01990.99010.98921.0211.05141.0292
DEPI 1.04671.05311.02651.0120.98720.97130.95670.98620.9810.9942
SGAI 0.94110.89250.86880.89790.93330.95540.97140.99241.0040.9939
LVGI 1.02121.02631.04651.01151.0261.03141.02511.01871.01911.0178
TATA -0.0364-0.0188-0.0281-0.0292-0.0351-0.0455-0.0407-0.0408-0.0434-0.038
M-score -2.59-2.47-2.50-2.58-3.16-3.22-2.55-2.58-2.63-1.31
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