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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 Honda Motor Co Ltd was -1.34. The lowest was -3.58. And the median was -2.54.
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 * 0.9278||+||0.528 * 0.996||+||0.404 * 0.9428||+||0.892 * 1.0665||+||0.115 * 1.0455|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0915||+||4.679 * -0.0485||-||0.327 * 0.9943|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $6,530 Mil.|
Revenue was 32953.9662215 + 32390.2766008 + 29738.3401159 + 30140.2358432 = $125,223 Mil.
Gross Profit was 7537.38221505 + 7344.67824358 + 6804.10243762 + 6596.65278374 = $28,283 Mil.
Total Current Assets was $54,587 Mil.
Total Assets was $162,340 Mil.
Property, Plant and Equipment(Net PPE) was $61,894 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,817 Mil.
Selling, General & Admin. Expense(SGA) was $17,690 Mil.
Total Current Liabilities was $49,092 Mil.
Long-Term Debt was $31,805 Mil.
Net Income was 1658.25825883 + -827.438177235 + 1020.98080322 + 1063.28382756 = $2,915 Mil.
Non Operating Income was 164.222612242 + 22.8191021653 + 287.737904386 + 367.0651765 = $842 Mil.
Cash Flow from Operations was 1626.81097171 + 3828.33163762 + 2081.15262877 + 2410.51839571 = $9,947 Mil.
|Accounts Receivable was $6,599 Mil.
Revenue was 29945.0688902 + 29000.618799 + 29314.5261655 + 29154.4295266 = $117,415 Mil.
Gross Profit was 6620.7991361 + 6536.34509882 + 6820.00078778 + 6436.62550023 = $26,414 Mil.
Total Current Assets was $51,942 Mil.
Total Assets was $152,754 Mil.
Property, Plant and Equipment(Net PPE) was $55,046 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,432 Mil.
Selling, General & Admin. Expense(SGA) was $15,196 Mil.
Total Current Liabilities was $45,400 Mil.
Long-Term Debt was $31,159 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)|
|=||(6529.92048478 / 125222.818781)||/||(6599.13707397 / 117414.643381)|
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)|
|=||(26413.7705229 / 117414.643381)||/||(28282.81568 / 125222.818781)|
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 - (54587.345718 + 61894.2695316) / 162339.961025)||/||(1 - (51941.7937157 + 55045.692402) / 152753.93514)|
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))|
|=||(5431.58145428 / (5431.58145428 + 55045.692402))||/||(5816.65858395 / (5816.65858395 + 61894.2695316))|
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)|
|=||(17689.6983974 / 125222.818781)||/||(15195.7320262 / 117414.643381)|
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)|
|=||((31805.081874 + 49092.4045262) / 162339.961025)||/||((31158.863744 + 45400.085355) / 152753.93514)|
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|
|=||(2915.08471238 - 841.844795293||-||9946.81363381)||/||162339.961025|
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 -2.75 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
Honda Motor Co Ltd Annual Data
Honda Motor Co Ltd Quarterly Data