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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 -2.55.
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 * 0.9979||+||0.528 * 0.9921||+||0.404 * 0.9411||+||0.892 * 1.0737||+||0.115 * 1.0049|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9684||+||4.679 * -0.0316||-||0.327 * 1.0008|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $6,164 Mil.|
Revenue was 30182.1150519 + 32057.6749066 + 32953.9662215 + 32390.2766008 = $127,584 Mil.
Gross Profit was 6589.24585834 + 7271.22945287 + 7537.38221505 + 7344.67824358 = $28,743 Mil.
Total Current Assets was $54,618 Mil.
Total Assets was $162,691 Mil.
Property, Plant and Equipment(Net PPE) was $63,501 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,058 Mil.
Selling, General & Admin. Expense(SGA) was $16,673 Mil.
Total Current Liabilities was $46,619 Mil.
Long-Term Debt was $33,560 Mil.
Net Income was 1455.32556137 + 1739.91470197 + 1658.25825883 + -827.438177235 = $4,026 Mil.
Non Operating Income was 409.592915746 + 375.460655523 + 164.222612242 + 22.8191021653 = $972 Mil.
Cash Flow from Operations was 570.104165499 + 2168.89048704 + 1626.81097171 + 3828.33163762 = $8,194 Mil.
|Accounts Receivable was $5,753 Mil.
Revenue was 29738.3401159 + 30140.2358432 + 29945.0688902 + 29000.618799 = $118,824 Mil.
Gross Profit was 6804.10243762 + 6596.65278374 + 6620.7991361 + 6536.34509882 = $26,558 Mil.
Total Current Assets was $51,378 Mil.
Total Assets was $152,820 Mil.
Property, Plant and Equipment(Net PPE) was $56,954 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,463 Mil.
Selling, General & Admin. Expense(SGA) was $16,035 Mil.
Total Current Liabilities was $43,117 Mil.
Long-Term Debt was $32,140 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)|
|=||(6163.66130135 / 127584.032781)||/||(5752.6780943 / 118824.263648)|
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)|
|=||(26557.8994563 / 118824.263648)||/||(28742.5357698 / 127584.032781)|
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 - (54618.2308158 + 63500.8935491) / 162690.742348)||/||(1 - (51377.7202286 + 56953.7961935) / 152819.870925)|
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))|
|=||(5463.14382466 / (5463.14382466 + 56953.7961935))||/||(6058.48897752 / (6058.48897752 + 63500.8935491))|
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)|
|=||(16672.7797354 / 127584.032781)||/||(16034.5461404 / 118824.263648)|
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)|
|=||((33560.1100363 + 46619.4273872) / 162690.742348)||/||((32140.3378962 + 43117.1044518) / 152819.870925)|
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|
|=||(4026.06034493 - 972.095285676||-||8194.13726187)||/||162690.742348|
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 -2.59 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