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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 -1.42. The lowest was -3.13. And the median was -2.52.
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 * 0.2296||+||0.528 * 1.2334||+||0.404 * 0.9561||+||0.892 * 1.0708||+||0.115 * 2.3214|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8325||+||4.679 * -0.0406||-||0.327 * 0.9745|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $5,753 Mil.|
Revenue was 29738.3401159 + 30140.2358432 + 29945.0688902 + 33515.4845113 = $123,339 Mil.
Gross Profit was 6804.10243762 + 6596.65278374 + 6620.7991361 + 5473.31481089 = $25,495 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 $3,644 Mil.
Selling, General & Admin. Expense(SGA) was $14,869 Mil.
Total Current Liabilities was $43,117 Mil.
Long-Term Debt was $32,140 Mil.
Net Income was 1020.98080322 + 1063.28382756 + 1503.71084057 + 701.93405845 = $4,290 Mil.
Non Operating Income was 287.737904386 + 367.0651765 + 323.912491735 + 817.744996657 = $1,796 Mil.
Cash Flow from Operations was 2081.15262877 + 2410.51839571 + 3361.62872842 + 848.950741105 = $8,702 Mil.
|Accounts Receivable was $23,398 Mil.
Revenue was 27571.848918 + 28063.8245783 + 29278.7976826 + 30264.2759429 = $115,179 Mil.
Gross Profit was 7077.09223597 + 6924.59067058 + 7348.57622113 + 8014.7547391 = $29,365 Mil.
Total Current Assets was $53,127 Mil.
Total Assets was $149,383 Mil.
Property, Plant and Equipment(Net PPE) was $50,771 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,238 Mil.
Selling, General & Admin. Expense(SGA) was $16,678 Mil.
Total Current Liabilities was $43,374 Mil.
Long-Term Debt was $32,114 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)|
|=||(5752.6780943 / 123339.129361)||/||(23397.6348291 / 115178.747122)|
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)|
|=||(29365.0138668 / 115178.747122)||/||(25494.8691684 / 123339.129361)|
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 - (51377.7202286 + 56953.7961935) / 152819.870925)||/||(1 - (53127.1511934 + 50771.3497699) / 149382.677147)|
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))|
|=||(8237.68863875 / (8237.68863875 + 50771.3497699))||/||(3644.11554679 / (3644.11554679 + 56953.7961935))|
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)|
|=||(14868.5875626 / 123339.129361)||/||(16677.5231826 / 115178.747122)|
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)|
|=||((32140.3378962 + 43117.1044518) / 152819.870925)||/||((32114.2978781 + 43374.0518407) / 149382.677147)|
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|
|=||(4289.9095298 - 1796.46056928||-||8702.250494)||/||152819.870925|
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 -3.02 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