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GuruFocus has detected 5 Warning Signs with Honda Motor Co Ltd $HMC.
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Honda Motor Co Ltd (NYSE:HMC)
Beneish M-Score
-2.61 (As of Today)

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 -2.59 suggests that the company is not a manipulator.

HMC' s Beneish M-Score Range Over the Past 10 Years
Min: -3.49   Max: -1.09
Current: -2.61

-3.49
-1.09

During the past 13 years, the highest Beneish M-Score of Honda Motor Co Ltd was -1.09. The lowest was -3.49. And the median was -2.52.


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 * 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
=-2.59

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

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

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)
=(6163.66130135 / 127584.032781) / (5752.6780943 / 118824.263648)
=0.0483106 / 0.04841333
=0.9979

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)
=(26557.8994563 / 118824.263648) / (28742.5357698 / 127584.032781)
=0.22350569 / 0.22528317
=0.9921

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 - (54618.2308158 + 63500.8935491) / 162690.742348) / (1 - (51377.7202286 + 56953.7961935) / 152819.870925)
=0.2739653 / 0.29111629
=0.9411

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
=127584.032781 / 118824.263648
=1.0737

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))
=0.08752662 / 0.08709808
=1.0049

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)
=0.13068077 / 0.13494337
=0.9684

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)
=0.49283405 / 0.49245849
=1.0008

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
=(4026.06034493 - 972.095285676 - 8194.13726187) / 162690.742348
=-0.0316

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.


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 local exchange's currency.

Honda Motor Co Ltd Annual Data

Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14Mar15Mar16
DSRI 0.97920.89411.00242.70980.92860.47592.33840.89421.02530.8606
GMI 1.00631.00831.11341.02610.9241.06980.99531.09991.03671.0045
AQI 0.92250.91850.94190.97810.99480.98671.05841.01150.92980.9324
SGI 1.11941.25620.86130.92441.15740.88051.08151.17240.90591.1679
DEPI 0.94690.93570.91011.00061.03161.09361.18181.16461.15230.9897
SGAI 0.98090.97471.14910.84870.99251.03870.89940.82611.08111.1188
LVGI 1.01821.00371.01080.94420.98391.01720.98771.02011.00761.0086
TATA -0.0186-0.0346-0.0169-0.1068-0.0526-0.0469-0.02570.0048-0.0346-0.0641
M-score -2.52-2.54-2.68-1.42-2.68-3.26-1.23-2.30-2.71-2.81

Honda Motor Co Ltd Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.95820.8860.97050.69190.26240.2620.97780.92781.04990.9979
GMI 1.16591.22551.03921.00520.97160.93841.0030.9960.98540.9921
AQI 0.96930.9640.92980.96480.98160.95610.93240.94280.93790.9411
SGI 1.08891.08760.9570.92820.93580.93831.0281.06651.07381.0737
DEPI 1.62081.79091.10341.07950.96610.87781.11071.04551.02711.0049
SGAI 0.75720.74631.07041.13041.22821.27531.13461.09151.03320.9684
LVGI 1.01780.99291.00760.99560.98720.97451.00860.99430.98941.0008
TATA 0.02250.0185-0.0356-0.049-0.0531-0.0558-0.0615-0.0485-0.0417-0.0316
M-score -2.15-2.18-2.72-3.08-3.53-3.58-2.80-2.75-2.60-2.59
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